&imwidth=800&imheight=600&format=webp&quality=medium "US Fed keeps rates unchanged, but Iran war price pressures trigger unusual split")
The US Federal Reserve left interest rates unchanged on Wednesday (July 29) for a fifth consecutive meeting, but growing inflation concerns linked to the Iran war led three policymakers to back a quarter percentage-point increase in borrowing costs. The Federal Open Market Committee (FOMC), the Fed's rate-setting panel, voted to keep the benchmark interest rate in the 3.50 per cent to 3.75 per cent range, a decision that financial markets had widely expected.
However, the outcome revealed a sharper divide among policymakers as inflation risks resurfaced following higher energy and commodity prices triggered by President Donald Trump's war on Iran.
Fed Chair Kevin Warsh said the US economy remained resilient in terms of employment, but inflation continued to be a major concern.
"We're doing pretty well collectively as a country, as policymakers on the full employment side," Warsh said after the meeting. "But we're doing considerably less well on prices. That's why we describe them as elevated and that's what's taken most of our discussion in terms of transmission mechanisms of monetary policy," he added.
According to the Fed, nine of the 12 policymakers believed the current interest rate was appropriate for the economy. However, officials from the Cleveland, Dallas and Minneapolis Federal Reserve banks dissented, arguing that rates should be raised by 0.25 percentage points to counter rising inflation.
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The three policymakers had also favoured a more restrictive monetary policy at the Fed's previous meeting.
US inflation eased to an annual rate of 3.5 per cent last month, but economists expect price pressures to intensify again as oil prices fluctuate due to the conflict involving Iran. The rise in energy costs has also contributed to higher global food prices, adding to inflationary pressures.
