Washington: President Donald Trump showed no regrets after his handpicked Federal Reserve chair, Kevin Warsh, neglected to cut benchmark interest rates as the president has called for since returning to the White House.
Fed officials voted 9-3 to keep the federal funds rate steady, with the dissenters calling for a rate hike because inflation has stayed above the Fed's 2 per cent target.
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"Kevin's got a board. He's fantastic. He's a brilliant guy. Smart. I know he'd love to see lower interest rates, but he's got a board and it's a political board and they want to keep rates up," Trump told reporters.
The president said the country is fighting through higher rates, saying he has achieved USD 19.2 trillion in investments in one year.
That figure is bloated and inaccurate as it would constitute the bulk of US gross domestic product and cannot be observed within broader economic data.
While the Federal Reserve left its key interest rate unchanged, three officials dissented in favour of higher rates as the central bank wrestles with how to deal with persistently high inflation.
The Fed's rate-setting committee reached its decision after two days of deliberations, marking the fifth straight meeting at which the benchmark rate was kept at around 3.6 per cent.
Some economists and Wall Street analysts had predicted the Fed would hike its rate by a quarter point. But while the decision to stand pat could be seen as good news for consumers, they might not feel much relief with the average credit card rate still near 20 per cent and mortgage rates the highest since last August.
Also Read: ‘Inflation remains elevated’: Fed holds rates steady; Kevin Warsh defends policy stance | FOMC meet
Inflation has been stuck above the central bank's 2 per cent target for more than five years. The Iran war has generated uncertainty over the economic outlook and has driven energy prices higher, intensifying inflationary pressure and creating a quandary for Fed policymakers. In addition, the vast amounts of money being spent by technology companies on artificial intelligence are both driving manufacturing and have resulted in increased prices for items such as computer chips and electricity. President Donald Trump's tariffs on foreign goods are also adding to inflation pressures.
The three officials who dissented -- Beth Hammack, president of the Federal Reserve Bank of Cleveland; Neel Kashkari, president of the Minneapolis Fed; and Lorie Logan, president of the Dallas Fed -- had previously called for or signalled that they would be open to raising rates to combat high prices.
"The dissents send a clear message: The Fed is not yet convinced the inflation battle has been won,'' said Seema Shah, chief global strategist at Principal Asset Management.
At a press conference following the rate decision, Warsh reiterated the Fed's commitment to combatting inflation. At the same time, Warsh said, "We have no magic wand. This isn't something we're going to be able to carry out in days or weeks."
Warsh said he welcomed vigorous debate at the committee meeting. "I asked for a good family fight and I got one,'' he told reporters at a press conference.
Warsh, who was appointed by President Donald Trump, has sought to bring a number of changes to the Fed, including giving financial markets fewer signals about the Fed's thinking on interest rates. He said he believed that reticence was a factor in the bond market pushing up yields in the past few weeks as it weighed new economic data. The yield on the 10-year Treasury has risen from around 4.50 per cent in mid-June to 4.64 per cent just ahead of the Fed's rate decision.
The market is "learning to play the ball and not the referee", Warsh said.
