Fed keeps policy rate unchanged amid Middle East uncertainty

The US Federal Reserve kept its benchmark federal funds rate unchanged Wednesday between a target range of 3.5% – 3.75%, as policymakers weighed persistent inflation, rising energy prices and heightened uncertainty from developments in the Middle East.

The decision, which was widely expected, came with an unusual level of disagreement among policymakers, as the Federal Open Market Committee was split 8-4.

It marked the highest level of dissent at a Fed policy meeting since October 1992, when four FOMC members also dissented.

The Fed said recent indicators suggest that economic activity has been expanding at a solid pace, while job gains have remained low on average, and the unemployment rate has seen little change in recent months.

“Inflation is elevated, in part reflecting the recent increase in global energy prices,” the central bank said in a statement.

The Fed said developments in the Middle East are contributing to a high level of uncertainty about the economic outlook, and that the committee remains attentive to risks to both sides of its dual mandate.

The FOMC said it seeks to achieve maximum employment and inflation at the rate of 2% in the longer run.

“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,” it said.

The central bank also said it remains “strongly committed” to supporting maximum employment and returning inflation to its 2% objective.

Voting for the monetary policy action were done by Fed Chair Jerome Powell, Vice Chair John Williams, Michael Barr, Michelle Bowman, Lisa Cook, Philip Jefferson, Anna Paulson and Christopher Waller.

Stephen Miran voted against the decision, preferring a 25 basis-point rate cut.

Beth Hammack, Neel Kashkari and Lorie Logan also dissented, supporting the decision to hold rates steady but objecting to language in the statement that signaled possible future easing.

The split underscored divisions inside the Fed about how to respond to elevated inflation and the risk that higher global energy prices could keep price pressures for longer above the central bank’s target.