The Federal Reserve has kept interest rates between 3.75% and 4%, choosing to wait for more data before deciding on further action. This pause comes after last month's increase and as the central bank assesses the potential impact of high energy costs and investments related to artificial intelligence on inflation.
The decision passed with ten votes in favor and two against. Governor Lisa Cook and Cleveland Federal Reserve Bank President Beth Hammack would have preferred a quarter-point increase. In the statement, the committee emphasized that new information will be needed to determine how to bring inflation back to the 2% target.
Fed Chairman Kevin Warsh stated that inflation expectations observed in the markets have decreased, despite energy costs remaining high. He also described economic growth as robust and broader, not limited to investments in artificial intelligence. According to Warsh, the coming months will provide useful insights for assessing the economy and market trends.
However, there is concern that the AI boom — with the construction of data centers, chip purchases, and increasing energy demand — could fuel price pressures. Added to this are energy costs and tariffs. Warsh dismissed the idea that rate hikes are ineffective in curbing tech investments: according to the chairman, the cost of money can impact, directly or indirectly, almost every sector.
Economists, as reported by the Wall Street Journal, are divided on the urgency of new action. Some believe rates need to rise further to limit demand and reduce the risk of families and businesses getting used to persistently high inflation. Others argue that the Fed can wait, as the labor market shows no clear signs of overheating. However, inflation remains above target for over five years, and recent price data has been stronger than expected.
The pause offers few immediate benefits to families and businesses: the market continues to consider possible further hikes, affecting credit card costs and new auto loans. Mortgages are also influenced by long-term bond yields and future rate expectations.
The Fed will therefore have to balance two risks: tightening monetary policy too much and slowing the economy, or waiting too long and allowing price pressures to spread. Wednesday's decision postpones the verdict but does not close the door to a new increase.
(Associated Medias) - All rights reserved