The Federal Reserve has decided to keep its benchmark interest rate steady at 3.50% to 3.75%. However, three of the 12 members of the Federal Open Market Committee (FOMC) expressed support for a rate hike, citing concerns over inflation pressures due to rising international oil prices.
On July 29, following a two-day FOMC meeting, the Fed announced it would maintain the current rate.
This marks the fifth consecutive hold this year, following similar decisions in January, March, April, and June. It is the second hold since Kevin Wash took office as Fed Chair.
The decision was made with a vote of 9 in favor and 3 against. In June, all 12 members had supported keeping rates unchanged.
This time, dissenting votes came from Beth Hammack, president of the Cleveland Federal Reserve Bank; Neel Kashkari, president of the Minneapolis Fed; and Lorie Logan, president of the Dallas Fed, who advocated for a 0.25 percentage point increase.
The increase in international oil prices due to tensions between the U.S. and Iran has led to heightened inflationary pressures domestically, prompting some Fed members to argue for a rate hike.
In its monetary policy statement, the Fed noted, “Despite increased uncertainty from conflicts in the Middle East, economic activity continues to expand at a solid pace.”
The employment situation was also described as relatively stable, with job growth aligning with labor force increases and the unemployment rate remaining largely unchanged. Productivity and business investment are also reported to be strong.
However, the Fed expressed caution regarding inflation. It stated, “Inflation remains above the committee’s 2% target,” adding that rising energy prices are impacting the costs of certain goods.
Chair Wash emphasized the Fed's commitment to price stability during a press conference. He stated, “There is only one target, and that is 2%,” asserting that there is no softened inflation target.
He further noted that the prolonged high inflation over the past five years has led some households, businesses, and markets to mistakenly believe that the Fed is tolerating inflation rates above 2%, which he dismissed as a “misconception.”
There remains a possibility of future rate increases. Projections from the FOMC members released in June indicated that the benchmark rate could be 0.25 percentage points higher by the end of the year. With three members advocating for an immediate increase in this meeting, the market is closely watching whether the Fed will raise rates in its upcoming September meeting.
President Donald Trump did not directly criticize Chair Wash for the Fed's decision to hold rates steady. When asked at the White House if he was disappointed with Wash, Trump replied, “No. Kevin is fantastic, brilliant, and smart.”
However, he criticized other Fed officials who favor maintaining higher rates, stating, “He has a board.” Trump has consistently called for rate cuts from the Fed.
Meanwhile, the Fed's decision to hold rates steady keeps the interest rate gap between South Korea and the U.S. at 1.00 percentage points. The Bank of Korea's Monetary Policy Committee raised its benchmark rate from 2.50% to 2.75% on July 16.
* This article has been translated by AI.
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