US Federal Reserve keeps rates unchanged as inflation remains high; Warsh says politics 'played no role' in decision

The US Federal Reserve held interest rates steady on Wednesday, in line with market expectations, just days before midterm elections in which rising inflation has emerged as a key issue. The 12-member Federal Open Market Committee (FOMC) voted 10-2 to maintain the target interest rate range at 3.75 to 4 per cent. The decision followed the central bank's first rate hike in three years at its previous meeting in September, with policymakers citing the need for more data to assess inflation.

"The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's two percent goal," the Fed said in a statement announcing its decision. Two committee members, Governor Lisa Cook and Cleveland Fed President Beth Hammack, dissented and called for an immediate rate increase of 0.25 percentage points. The central bank has remained above its long-term inflation target of two percent for more than five years, putting sustained pressure on households and businesses through continued price increases.

US President Donald Trump's war on Iran, launched in late February, has sent energy prices soaring and added to domestic inflationary pressures, alongside his wide-ranging tariff policies. Prices have also been driven by an investment boom in artificial intelligence (AI) technology and the construction of large data centres to support it. The Fed's decision came six days before the November 3 midterm elections, in which Democrats are seeking to wrest control of both chambers of Congress from Trump's Republicans.

Trump's handling of the economy has been a central campaign issue, as working-class households across the country struggle to meet expenses despite largely stable overall economic growth. US consumer inflation rose more than expected in September, reaching 3.7 per cent and moving closer to a three-year high recorded in May. However, key Fed policymakers, including Warsh, have indicated that they do not see an urgent need for another immediate rate hike.

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Warsh says inflation remains too high

US Federal Reserve Chairman Kevin Warsh said that inflation remained too high as American households faced rising gasoline costs ahead of the midterm elections. "Inflation is too high," Warsh told reporters. He also said the Fed would reduce the number of its rate-setting meetings by one next year.

Fed chair says politics played no role in decision

Warsh stressed that political considerations were not discussed during the central bank's policy meeting, which took place just days before the crucial midterm elections. "Politics played no role in the decision," Warsh told a press conference after the independent Fed decided to hold interest rates steady. “I didn't hear a reference to politics, elections, what's happening in the next week or so.”