US Federal Reserve keeps interest rates unchanged

The Federal Reserve kept interest rates unchanged on Wednesday despite three policymakers dissenting in favor of higher rates, as inflation remains stubbornly high.

The Fed's rate-setting committee took two days to reach the agreement to leave the benchmark interest rate in the 3.50 percent to 3.75 percent range. The decision passed in a 9 to 3 vote.

But there was dissent from three of the 12 members of the policy-setting Federal Open Market Committee including Beth Hammack, president of the Federal Reserve Bank of Cleveland; Neel Kashkari, president of the Minneapolis Fed; and Lorie Logan, president of the Dallas Fed.

All had "preferred" a quarter-percentage-point hike at this meeting but ultimately things remained the same, according to the Fed's statement.

Seema Shah, chief global strategist at Principal Asset Management, told The Associated Press that, "The dissents send a clear message: The Fed is not yet convinced the inflation battle has been won."

New Fed chair Kevin Warsh, who took over from Jerome Powell in May, has vowed to have "no tolerance" for inflation.

He repeated his commitment on Wednesday to not waver on reaching his 2 percent target.

But inflation has been above the central bank's 2 percent target since early 2021 when the US economy overheated as it came back from COVID-19 lockdowns, AP reported.

Warsh stressed at a news conference after the rate decision that there was no quick fix.

"We have no magic wand. This isn't something we're going to be able to carry out in days or weeks," he said.

The new Fed chair acknowledged the fractures in the meeting over the decision to keep rates steady.

"I asked for a good family fight and I got one," he told reporters.

Warsh, who was appointed by President Donald Trump, has ushered in a slew of changes at the Fed since taking the helm.

He opted to end "forward guidance", which was a hint in Fed statements about where interest rates may be heading in the future.

He has also adopted simpler Fed statements and said he would focus on "the facts as best as we can judge it".

Trump, who had previously heaped pressure on the Fed to cut rates, described Warsh as "fantastic" to reporters on Wednesday.

Trump said he was "a brilliant guy. Smart. I know he'd love to see lower interest rates, but he's got a board and it's a political board and they want to keep rates up."

The decision on rates comes amid global tumult, including the ongoing conflict with Iran, which briefly paused this week, and a rise in oil prices that surged up to $100 a barrel last week.

Other crucial economic factors that the Fed is reportedly watching include new US tariffs enacted by Trump this week on global trade partners.

Some Fed policymakers believe that raising rates is a way to get inflation to the 2 percent target.

The Fed said in its outlook that economic activity was expanding at a "solid pace", repeating a statement it had first made in June.

It added that job gains "have kept pace with the workforce, and the unemployment rate has changed little".

The AP reported that Fed officials likely want to see more economic data before changing the benchmark rate.