The US Federal Reserve has decided to keep the 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, unanimously 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 favour of the decision.
"The Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent, in support of the Federal Reserve's dual mandate. The Committee reaffirmed its policy of maintaining ample reserves in the banking system," 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".
Thye FOMC noted that economic activity is expanding at a solid pace despite "elevated uncertainty" due to the conflct in the Middle East. Job gains have kept pace with the workforce, and the unemployment rate has changed little, it added.
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Rate Hike Possible In 2026
A hawkish pivot could be on cards as nine out of the 18 Fed officials, in their forecast, pointed to a likelihood of at least one rate hike in 2026.
The projection dampened the 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 out.
The last time when the Fed increased rate was in July 2023, when the post-Covid era inflation had spiked. Since then, Fed began shifting its stance and implemented six rate cuts across 2024 and 2025.
The commodities market was also hit with the possibility of Fed initiating the rate hike cycle, with gold slipping nearly 1% to $4,291.48 an ounce, and silver was down 1.36% at $69.07 per ounce. On the flip side, the 2-Year Treasury yields climbed 9 basis points to 4.134%.
Notably, the historic bull run in the bullion market ended in January-end, 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 Bush, is known as a "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 January-end peak, whereas gold has slumped by about 15% from the all-time highs recorded at the start of the year.
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