▲ Fed Chair Kevin Warsh
The Federal Reserve, the central bank of the United States, on June 17 (local time) held its benchmark interest rate steady at 3.50% to 3.75% in its first Federal Open Market Committee (FOMC) meeting under newly appointed Chair Kevin Warsh.
In addition, unlike in March when no officials projected a rate hike this year, half of the committee members now anticipate at least one increase, signaling the possibility of a rate hike within the year.
Analysts note that during the first FOMC meeting under Chair Warsh—who was appointed amid expectations of rate cuts from US President Donald Trump—signs of a shift toward a hawkish policy path have coincidentally become clear.
The Fed announced that it unanimously decided to maintain the current benchmark interest rate at the conclusion of its regular FOMC meeting on Wednesday.
This marks the fourth consecutive time the central bank has frozen the benchmark rate.
The Fed had cut the benchmark rate by 0.25 percentage points (p) for three consecutive times in September, October, and December of last year, before keeping it unchanged in January, March, and April of this year.
In its policy statement, the Fed said, "Inflation remains elevated relative to the Committee's 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy," adding, "The Committee will deliver price stability."
The Fed elaborated, "Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East," adding that "productivity growth and capital investment are strong," and "job gains have kept pace with the workforce, and the unemployment rate has changed little."
The so-called "easing bias" language regarding the future direction of policy was completely removed.
This appears to reflect Chair Warsh's belief that the Fed should not talk too much and that forward guidance is unnecessary.
Fed officials presented a more hawkish outlook on future monetary policy than before.
The median projection for the benchmark interest rate at the end of this year on the dot plot, which maps out the expectations of Fed officials, rose to 3.8% from 3.4% in the previous dot plot in March.
Out of the 18 officials who submitted their year-end interest rate forecasts, nine projected at least one rate hike.
Three officials projected a 0.25 percentage point hike, five expected a 0.50 percentage point hike, and one anticipated a 0.75 percentage point hike. Eight officials projected rates to remain unchanged, while one predicted a 0.25 percentage point cut.
This is a sharp shift compared to the March dot plot, where no officials expected a rate hike this year and 12 projected cuts.
Chair Warsh, who is critical of providing projections, did not submit an estimate.
The Fed projected the US economic growth rate (real Gross Domestic Product) for this year to be 2.2%.
This is a downward adjustment of 0.2 percentage points compared to March.
The Personal Consumption Expenditures (PCE) price index, one of the key indicators for interest rate decisions, is projected to rise 3.6% by the end of this year.
This is a significant increase from the 2.7% projected in March.
The unemployment rate, another key indicator, is projected to be 4.3%, similar to the 4.4% projected in March.
With this freeze by the Fed, the interest rate gap between South Korea (2.50%) and the US remains at 1.25 percentage points based on the upper bound.
This FOMC meeting is the first held since Chair Warsh took office last month.
It appears that from the very first FOMC meeting under Chair Warsh, who took office amid President Trump's expectations for rate cuts, the Fed is turning toward rate hikes.
At a press conference on Wednesday, Chair Warsh explained, "This policy statement focuses on conveying the facts as we see them, and forward guidance was not included."
Meanwhile, President Trump, who had constantly pressured the Fed to cut rates under former Chair Jerome Powell, reacted to the Fed's decision to hold rates on Wednesday by saying, "It's okay. It doesn't matter."
Regarding the growing possibility of a rate hike, Trump said, "It could happen. It's hard to believe. It (raising rates) only slows down the economy," while adding, "We have a very good person there (at the Fed) now."
※ Please note: This article was translated by AI and may contain errors.