Federal Reserve keeps interest rates steady, higher inflation likely to continue: CEI analysis

The Fed has decided to keep interest rates steady, with inflation still too high to warrant rate cuts. With Fed Chairman Jerome Powell’s term coming to an end, attention is on Trump nominee Kevin Warsh’s plan for future monetary policy.

CEI Policy Analyst Steve Swedberg:

“The Fed’s decision to keep interest rates steady comes at a time when inflation risks remain elevated and increasingly uncertain. Inflation remains above the Fed’s two percent target, and escalating geopolitical conflict in the Middle East has already pushed global energy prices higher. Rising oil and gasoline costs often ripple through transportation, manufacturing, and household expenses, which makes it more difficult to bring inflation fully under control.

“Under these conditions, shifting toward lower interest rates would send the wrong signal. Inflation has repeatedly proven more persistent than policymakers expected, and easing monetary policy while price pressures remain unresolved risks allowing inflation to accelerate again rather than bringing it fully under control.”

CEI Senior Economist Ryan Young:

“As expected, the Federal Reserve held interest rates steady. While darkening economic clouds would typically make the Fed lean towards interest rate cuts, that is not a wise course of action when inflation is still above target, as it has been now for five years running. This morning’s Producer Price Index news indicates that further inflation will be on the way.

“President Trump wants lower interest rates and easy money, especially going into the midterm elections. Fed Chairman Jerome Powell is not going to give in to that unless the economic data point him in that direction. However, this was Powell’s second-to-last interest rate meeting. All eyes are on whether Kevin Warsh, Trump’s nominee to succeed Powell, would be similarly independent, or would follow orders. A lot hinges on the answer to that question.”