Fed Holds Rates Steady As Three Officials Push For A Hike
By CU Today Staff —
WASHINGTON—The Federal Reserve held its benchmark interest rate steady Wednesday, but three policymakers broke with the majority and voted for a quarter-point increase, exposing growing concern inside the central bank over persistent inflation.
The Federal Open Market Committee voted 9-3 to maintain the federal funds rate at 3.5% to 3.75%.
The Fed said economic activity continues to expand at a solid pace, with strong productivity and capital investment, while job gains have kept pace with workforce growth and unemployment has changed little. Inflation, however, remains above the central bank’s 2% goal, partly because supply shocks have pushed up prices in sectors including energy.
Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan dissented, each preferring a quarter-point increase. The split marked a sharp change from the Fed’s unanimous June decision and suggested policymakers are becoming less willing to tolerate above-target inflation, particularly as higher oil prices threaten to renew price pressures.
Fed Chairman Kevin Warsh said the economy is showing “impressive resilience” and suggested higher bond yields may already be doing some of the Fed’s work by tightening financial conditions.
America's Credit Unions' Senior Economist Dawit Kebede said the three dissents in favor of a hike show that more members are leaning toward tightening.
"The statement reaffirmed the 2% inflation target to keep expectations anchored," Kebede said. "The chair also framed the pullback in forward guidance as letting markets respond to the data, pointing to higher nominal Treasury yields as evidence that conditions are tightening even while the Fed holds. For consumers navigating this environment, credit unions continue to offer affordable rates on the financing their members need.”
Originally reported by CU Today.