Fed holds interest rates steady despite Trump’s renewed calls to lower them

Kevin Warsh, the Fed chair, at a news conference on Wednesday. Photograph: Annabelle Gordon/UPI/ShutterstockView image in fullscreenKevin Warsh, the Fed chair, at a news conference on Wednesday. Photograph: Annabelle Gordon/UPI/ShutterstockUS economyFed holds interest rates steady despite Trump’s renewed calls to lower themRates remain unchanged for fifth time since December as tenuous Iran peace deal pushes energy prices up again

The US Federal Reserve held interest rates steady on Wednesday in a divided vote, indicating growing pressure on the central bank to address heightened inflation.

The Fed’s federal open market committee voted 9-3 to maintain rates, with three dissenting members indicating a preference to raise the rate by a quarter-percentage point. It was the first time in a decade that three board members shared dissent over a policy decision.

Cooler inflation data published earlier this month may have eased expectations for an imminent rate hike, but Kevin Warsh, the new Fed chair, said in a news conference that the committee was less interested in “any one piece of data” and was more focused on overall trends. The tenuous peace deal between the US and Iran has also sent energy prices creeping up again.

Warsh has repeated that he wants policy decisions to emerge from a “good family fight” and said on Wednesday he “got one” during his second Fed meeting as chair.

“Most of our discussion was on the big questions that matter to the conduct of monetary policy,” Warsh said. “We didn’t hide from them. We weren’t scared of them. There was a lot more interaction between my colleagues, it was a real family fight. My view, which you’ve long heard, is that’s the better way to get policy right.”

Just two weeks ago, one of the dissenting bank presidents, Lorie Logan of Dallas, made the case for “modestly higher interest rates”, arguing in public remarks that they would better balance the “outlook and risks” for the Fed’s dual mandate of maximum employment and price stability.

“Inflation has been too high, for too long, and does not appear to be on track all the way back to 2%,” she said. “And the inflation risks are to the upside. The labor market, meanwhile, is solid. Without any policy restraint, these conditions are likely to continue until there’s an unanticipated shock.”

Logan joined Beth Hammack in Cleveland and Neel Kashkari in Minneapolis in the dissenting minority. The three bank presidents have formed a bloc before, most recently in April when they all disagreed with the committee’s decision to include a forward looking statement, or “easing bias”, in the Fed’s news release.

Though Warsh was adamant about delivering price stability in Wednesday’s news conference, it was unclear exactly what tools he planned to use to achieve that goal. While he said that interest rates could be used as “part of that solution”, he added: “I wouldn’t say it’s in isolation.”

Warsh has signaled he is ushering in a new era at the central bank, one that emphasizes a reservedness toward forward guidance. At his first meeting in June, he announced five new taskforces – comprising economics professors, business leaders and former central bank governors – that are meant to rethink how the Fed approaches its communications, data, balance sheet policy, inflation framework and the impact of artificial intelligence on its policy judgments.

The US-Israel war with Iran, which has endured since the end of February, has pushed energy prices higher for American households and businesses.