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The U.S. Federal Reserve will likely hold interest rates steady on Wednesday at Kevin Warsh’s first meeting as central bank chairman, though looming rate hikes remain possible to combat surging inflation.
Warsh presided over the Federal Open Market Committee’s two-day meeting this week, with policymakers set to announce their decision at 2:00 pm local time.
Skyrocketing energy prices, driven by President Donald Trump’s war on Iran, recently pushed U.S. inflation to a three-year high of 3.8 per cent in April.
A firming labour market and raging prices have heightened inflation anxieties among Fed officials, putting future rate hikes firmly on the table.
Such a shift would likely infuriate Trump, who has mounted an unprecedented public intimidation campaign to force the central bank to lower interest rates.
While Warsh previously supported rate cuts, market analysts expect him to join other policymakers on Wednesday in adopting a “wait-and-see” approach to let the current energy shock ripple through the economy before modifying policy.
Investors will closely scrutinise the Fed’s post-meeting statement for any shifts in monetary guidance, as at least four of the twelve voting members favour language that opens the door to potential rate hikes.
The Fed will also release its quarterly summary of economic projections on Wednesday.
Warsh has openly criticised the central bank’s traditional “dot-plot” forecasts and forward guidance, arguing they restrict policymaking flexibility, though experts predict he will implement communication reforms gradually rather than abandoning these tools immediately at his debut meeting.
