Decision follows a key step in the approval of Powell's designated successor
The United States Federal Reserve announced today that it will hold its overnight interest rate steady in a range of 3.5 to 3.75 per cent, pointing to an inflation rate that has long remained above the Fed's two per cent target.
The move was widely predicted, especially in light of the ongoing energy shock caused by the US-Israeli war with Iran and its consequent upward pressure on inflation. The most recent inflation print in February using the Fed's preferred PCE measure had inflation at 2.8 per cent.
"Recent indicators suggest that economic activity has been expanding at a solid pace," a press release announcing the decision reads. "Job gains have remained low, on average, and the unemployment rate has been little changed in recent months. Inflation is elevated, in part reflecting the recent increase in global energy prices."
This could be the final Fed decision with Jerome Powell as Chair. His appointed successor Kevin Warsh cleared the Senate Banking Committee earlier today, and will likely be approved by the Republican-controlled Senate. There has been some speculation that Warsh may be more dovish than Powell, in line with President Trump's consistent calls for lower interest rates.
The Fed's statement announcing the decision emphasized the data-depenedent nature of this decision.
"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," the release reads. "Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook. The Committee is attentive to the risks to both sides of its dual mandate."
