New York, July 30 (IANS) The US Federal Reserve is keeping the benchmark interest rate unchanged at 3.5 per cent to 3.75 per cent in the face of inflation threats.
The decision on Wednesday (local time) sent stock markets tumbling, with the Dow Jones falling 1,153 points, or 2.19 per cent, and the NASDAQ down 433 points, or 1.74 per cent.
The Federal Open Market Committee (FOMC), which sets the rates, was split, with nine members voting to keep the rate unchanged, while three, Neel Kashkari of Minneapolis Federal Reserve among them, unsuccessfully pressed for a quarter-point rate hike.
The Fed’s Chairman Kevin Warsh called the dissent a “good family fight” over how to tame inflation while keeping the economy steady and the job market growing.
Warsh was handpicked to lead the Fed by President Donald Trump, who had feuded with his predecessor Jerome Powell over his refusal to lower interest rates.
Now Warsh has disappointed Trump by not cutting interest rates as inflation is showing signs of spiking, fueled by Trump’s Iran war and its fallout in the economy in the US and around the world.
On Wednesday, the Gulf conflict, which has been a factor in inflation, flared up again and spread to Iraq.
Speaking to reporters at the White House, Trump defended Warsh, saying he was doing a “fantastic job” and deflecting blame to the FOMC.
“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,” he said.
This was Warsh’s second time presiding over the rate-setting meeting of the FOMC since he took over in May, and the rates were again held steady.
The next meeting in September will be the last before the November mid-term election.
The June Consumer Price Index report showed a rise of 3.5 per cent compared to a year ago.
After the meeting, Warsh reiterated his commitment to the goal of bringing inflation down to 2 per cent, which limits his option to lower the interest rate.
He is walking a tightrope between the twin goals of low inflation and job growth.
But, he said, “I do not believe that price stability and full employment is an either-or proposition.”
He declared that “where necessary and appropriate, we will not hesitate to act”.
–IANS
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