Kamal Ghorui
US Federal Reserve policy: Jerome Powell-led Federal Open Market Committee (FOMC) on Wednesday kept interest rates unchanged within the 3.50%-3.75% band. “In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3‑1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective,” the FOMC statement said.“Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has been little changed in recent months. Inflation remains somewhat elevated,” the policy statement said.The policy statement flagged ‘uncertainty’ related to the US-Iran conflict. “Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the US economy are uncertain. The Committee is attentive to the risks to both sides of its dual mandate,” it said.Experts had said that fears of oil prices stoking inflation were unlikely to push the Federal Reserve toward raising interest rates at this week’s meeting. While markets and economists had earlier anticipated that the next move would be a rate cut, that conviction has weakened since the United States and Israel launched airstrikes on Iran on February 28.US President Donald Trump has consistently urged Fed Chair Jerome Powell to lower borrowing costs. Trump has nominated former Fed Governor Kevin Warsh—seen as supportive of rate cuts—to succeed Powell when his term ends in mid-May, although challenges to that transition remain.The US economy currency faces persistent inflation, softening labour demand, and an “uncertain” outlook shaped by the conflict in Iran.In an 11–1 decision, policymakers held the benchmark rate within the 3.50% to 3.75% range, while indicating that one rate reduction is expected before the end of the year.With inflation, as measured by the Fed’s preferred gauge, staying above its 2% target for five consecutive years, some policymakers had already been considering keeping the option of a rate hike open even before the Iran conflict drove crude oil prices up by about 50% and pushed US gasoline prices sharply higher.Earlier today, US wholesale inflation data exceeded expectations in February. Data released by the Labor Department on Wednesday showed that the producer price index (PPI) – which tracks price changes before they reach consumers – rose 0.7% compared to January and increased 3.4% from February 2025. The annual rise marked the strongest pace since February 2025.The uptick, partly fueled by a notable jump in food prices between January and February, was higher than economists had anticipated. Notably, these increases occurred before the US and Israel’s strike on Iran led to a sharp surge in energy costs.
