The US Federal Reserve Board (Fed) announced its interest rate decision yesterday. The Fed said it was holding its federal funds rate steady for a fifth consecutive meeting. Still, there was some division among Fed officials, with a few voting to raise interest rates with inflation well above the Fed’s 2% target. However, solid economic growth and labour market kept rates on hold, at least for now. Here’s more about the Fed’s interest rate decision.

• The Fed held the target range of its federal funds rate steady at 3.50%–3.75% at its July meeting, which was widely expected by economists, according to a Bloomberg survey.
• Three regional Fed presidents dissented, voting instead for a 25-basis-point rate increase, in a rare optimistic split. There were some concerns over elevated inflationary pressures. Still, the Fed’s statement reiterated its commitment to price stability.
• The Fed pointed to the war in the Middle East as a key source of uncertainty, noting that economic activity has been relatively solid even as conflict-driven energy costs keep inflation above its 2% target.
• Fed Chair Kevin Warsh has scaled back forward guidance since taking over leadership of the Fed in May, meaning fewer hints about the Fed’s next move. Addressing reporters after the announcement, Warch said the Fed will not hesitate to shift interest rates if warranted.

For now, the Fed is choosing to wait and watch rather than react, even with three of its own policymakers pushing for an interest rate hike. That signals that Fed officials see current rates as appropriate for an economy still growing but facing inflation risks tied to geopolitical shocks. Markets in the US should expect borrowing costs, from mortgages to credit cards, to stay where they are for now, with the next federal funds rate move more likely up than down if energy prices keep climbing.

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