- The US Federal Reserve kept benchmark rates unchanged at 3.5%-3.75%
- The decision aligns with market expectations during the FOMC meeting
- Kevin Warsh chaired his second Federal Open Market Committee meeting
The US Federal Reserve has decided to maintain status quo for now, in line with the market's expectations. The Federal Open Market Committee (FOMC), in its second meeting held under the chairmanship of Kevin Warsh, voted to keep the benchmark lending rates unchanged in the range of 3.5%-3.75%.
The FOMC decision was driven by the looming concerns over inflation, which has persistently stayed above the Fed's medium-term target of 2%.
The voting was not unanimous, as nine members backed the decision to hold rates steady, whereas three differed with the majority's opinion. The dissenters were Fed regional presidents Beth Hammack, Neel Kashkari and Lorie Logan. The trio pitched for raising "target range for the federal funds rate by 1/4 percentage point", according to a post-meeting statement.
Ahead of the Fed meeting, traders priced in a 36% probability of a rate hike, according to CME FedWatch. However, nearly two-thirds of the market was expecting the rates to be held steady.
The FOMC, in its statement, noted that uncertainty remains "elevated" partly due to the conflict in the Middle East. Simultaneously, it stated that the economic activity is expanding at a "solid pace", led by strong productivity growth and capital investment.
"Job gains have kept pace with the workforce, and the unemployment rate has changed little," the Fed said, but pointed out that inflation remains above the 2% goal for now. This can be partly attributed to the supply shocks that have driven price increases in certain sectors, including energy, it said.
ALSO READ: Rates 'Part Of Solution' If Inflation Stays High, Says Warsh
Details that emerged following the FOMC meeting showed that a September rate hike was no longer fully priced in. This eased the fears of an imminent pivot in the equity and commodities market. Dow Jones which earlier fell 1.59% was trading 1.40% lower at 11:45 p.m. (IST), whereas S&P 500 saw some recovery and was down 0.34%, and Nasdaq which fell 1.17% is now trading 0.12% lower.
The precious metals market reacted positively, with spot gold rising about 1% to $4,070 an ounce, whereas silver market a sharper uptick, with spot market rates rising over 2% to $58 per ounce.
Commenting on the recent upward movement in the treasury market, Warsh said in his press briefing that yields are rising despite the decision to keep rates intact. According to him, "less forward guidance" may have influenced the market moves.
"Market participants are learning to play the ball, not the referee, and market prices will continue to respond in the direction and magnitude they see fit," he said.
Notably, this was the fifth consecutive Fed meeting, and second under Warsh, when the rates were left unchanged. The next meeting will be held on September 15-16.
ALSO READ: Fed Pause Lifts Metals: Gold Crosses $4,100, Silver Jumps Over 3% As September Hike Bets Ease
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