The US Federal Reserve Board (Fed) made its first interest rate decision under new Chair, Kevin Warsh. Despite expectations of Warsh leaning towards lower interest rates, the Fed unanimously elected to hold interest rates steady at a fourth straight meeting. Fed officials were divided on the path of interest rates this year but said they are committed to price stability. With US labour markets appearing to have strengthened in recent months, the Fed appears focused on monitoring inflationary pressures.

• At its June meeting, the Fed held its federal funds rate steady at a target range of 3.50%–3.75%, its fourth consecutive rate hold. Economists were expecting the Fed to hold steady, according to a Bloomberg survey.
• The Fed acknowledged that inflation is running at elevated levels but reinforced its goal of price stability. The US central bank also noted that US economic growth has been “solid.”
• The central bank revised lower its projection for economic growth this year, from 2.4% to 2.2%. It expects the annual personal consumption expenditure price index to rise to 3.6% in 2026, largely in response to the effects of the conflict in the Middle East.
• Looking ahead, there was little consensus among Fed officials on the future path of interest rates. Several officials project a rate hike this year, while others expect to hold or lower interest rates.

The Fed will continue to monitor incoming data before adjusting its policy interest rate. Investors were given little direction on the path of interest rates this year, which may lead to investors carefully analyzing each economic data release to predict where interest rates are headed. Last week, the Bank of Canada also held its policy interest rate steady and will closely monitor the progress of prices, the Canadian economy and labour market before any shift in monetary policy.

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