The Federal Reserve kept interest rates unchanged on Wednesday in Kevin Warsh's first meeting as chair.
Concretely, the Federal Open Market Committee (FOMC) maintained the federal funds rate in the 3.5%-3.75% range, in line with economists' expectations for the meeting.
The vote was unanimous, in contrast with previous meetings. "Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East," the central bank said in its statement. It added that "job gains have kept pace with the workforce."
Policymakers also released their expectations for the future. Concretely, they believe that, under current circumstances, they will implement one rate hike this year and cut it once in 2027.
The Fed is under continued scrutiny over how it will react to inflationary pressures, most of which have stemmed from the war in Iran.
The latest figure available showed that inflation accelerated in May to its highest rate in three years, clocking in at 4.2%.
It was the first time since April 2023 that inflation climbed above 4%, CNBC noted. The monthly figure rose by a seasonally adjusted 0.5%. Both figures were in line with expectations.
The outlet added that, despite the headline increase, the so-called core CPI, which excludes more volatile components like food and energy, climbed 0.2% compared to April and 2.9% in an inter-annual basis.
Fed officials said they expect core inflation, which excludes more volatile components like food and energy, to remain at 2.5% through 2027. The fed said the "committee will deliver price stability." NBC News noted that, in contrast with previous documents, the Fed refrained from communicating what it might do in future meetings.
In this context, the inflation-adjusted wage gains that many American workers accumulated during the first year of President Donald Trump's second term have largely disappeared following the recent spike in consumer prices.
Real wages for production and nonsupervisory workers, a closely watched measure of earnings for rank-and-file employees, are up just 0.1% since Trump returned to office in January 2025 after a sharp erosion of purchasing power over the last four months. The decline came as inflation accelerated, largely driven by rising energy costs tied to the ongoing conflict involving Iran.
Real average hourly earnings for production and nonsupervisory workers fell 0.3% from April to May after accounting for inflation, while real average hourly earnings for all private-sector employees declined 0.1% during the month, according to BLS.
