WASHINGTON - The U.S. Federal Reserve on Wednesday signaled one quarter-point interest rate hike by the end of this year amid growing inflation concerns, marking a course change under new chair Kevin Warsh as he presided over his first monetary policy meeting.
Based on the central bank's latest economic projections, however, the anticipated year-end rates for 2027 and 2028 suggest likely rate cuts. Policymakers had previously indicated a rate cut by the end of this year.
As a new measure under Warsh, the Fed has stopped providing what it calls "forward guidance," or any hints as to its future policy direction, in post-meeting statements. Warsh had criticized the practice as potentially limiting the bank's policy flexibility.
In the day's decision, the Fed held its benchmark interest rate steady. The target range for the federal funds rate, which commercial banks charge each other for overnight loans, was left unchanged at 3.50-3.75 percent, where it has stood since December.
The decision comes as other major central banks, including the Bank of Japan, have moved to raise their policy rates over the past week amid inflation risks stemming from elevated crude oil prices due to the U.S.-Israeli war against Iran.
"We recognize that inflation has been running well ahead of the Fed's long-stated inflation goal of 2 percent. That's been going on for more than five years. Persistently high prices are a burden for the American people," Warsh said at his inaugural press conference as chair after the meeting of the Fed's rate-setting Federal Open Market Committee.
"But the recent past need not be prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous -- this committee will deliver price stability," he added.
Having succeeded the post from Jerome Powell in late May, Warsh came into the latest two-day FOMC meeting having to navigate rising inflation as well as the public statements of President Donald Trump, who has repeatedly called for lower borrowing costs.
Last week, the U.S. Labor Department said consumer prices jumped 4.2 percent in May from a year earlier, the biggest increase in over three years, amid a surge in crude oil prices after Iran all but closed the Strait of Hormuz, the world's major energy shipping lane.
Coupled with a better-than-expected jobs report for May released earlier this month, the development has heightened expectations among market participants that the Fed could raise its benchmark interest rate by the end of the year.
