- The US Federal Reserve kept benchmark rates steady at 3.5%-3.75% unanimously
- Nine Fed officials foresee a potential rate hike in 2026, signaling hawkish shift
- Gold and silver prices dropped sharply after the Fed decision, Treasury yields rose
The US Federal Reserve has decided to keep benchmark lending rates on hold, in view of the uptick in inflation driven by global headwinds. The Federal Open Market Committee (FOMC), led by new Chair Kevin Warsh, decided to keep rates steady in the 3.5%-3.75% target range.
The decision to keep rates on hold was unanimous, as FOMC members voted 12-0 in favor of the move.
"The Committee reaffirmed its policy of maintaining ample reserves in the banking system," the FOMC said in a statement issued after the meeting concluded on Wednesday. Inflation, it said, remains elevated relative to the committee's 2% goal, in part reflecting supply shocks that have "driven price increases in certain sectors, including energy."
In the run-up to the Fed meeting, US inflation soared to 4.2% on an annual basis, marking the sharpest jump in three years. This was driven by an increase in gasoline prices due to supply chain disruptions in the Middle East.
Commenting on other macroeconomic indicators, the FOMC said GDP is expanding at a solid pace despite "elevated uncertainty" due to the conflict in the Middle East. Job gains have kept pace with the workforce, and the unemployment rate has changed little, it stated.
ALSO READ | US Fed Meeting Live Updates: New Chair Kevin Warsh Begins Address After Rates Held Steady
Rate Hike Possible In 2026
A hawkish pivot could be on the cards as nine out of the 18 Fed officials, in their forecasts, pointed to a likelihood of at least one rate hike in 2026.
The projection dampened Wall Street, as the Dow Jones Industrial Average gave up its intraday gains and was trading only 0.1% higher. The S&P 500 and Nasdaq Composite fell 0.4% after the Fed decision was announced.
The last time the Fed increased rates was in July 2023, when post-Covid era inflation had spiked. Since then, the Fed began shifting its stance and implemented six rate cuts across 2024 and 2025.
The commodities market was also hit by the possibility of the Fed initiating a rate hike cycle, with gold slipping over 2% to $4,247.48 an ounce and silver dropping 4.36% to $67.07 per ounce. On the flip side, 2-Year Treasury yields climbed 9 basis points to 4.134%.
Notably, the historic bull run in the bullion market ended in late January, when Trump confirmed Warsh as his pick to replace then-Fed Chair Jerome Powell. Warsh, who served as a Fed governor under the presidency of George W. Bush, is known as an "inflation hawk."
Even as Trump repeatedly called for rate cuts under Powell's Fed chairmanship, analysts saw the appointment of Warsh as a move to tame inflation and strengthen the dollar in the near-to-medium term. A high-rate environment, along with a strong US dollar, has an inverse impact on precious metals.
Silver is still down by about 40% from its late-January peak, whereas gold has slumped by about 15% from the all-time highs recorded at the start of the year.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.