Industry News

WASHINGTON, June 17 (Xinhua) -- The U.S. Federal Reserve on Wednesday kept the target range for the federal funds rate unchanged at 3.5-3.75 percent.

"Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little," said the Federal Open Market Committee (FOMC) in a statement.

Meanwhile, "inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy," the FOMC went on in the statement.

In support of the Fed's dual mandate, the committee "decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent," the statement said.

The FOMC reaffirmed "its policy of maintaining ample reserves in the banking system."

All 12 FOMC members voted for keeping the rate unchanged.

Following the FOMC meeting held on Tuesday and Wednesday, meeting participants submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate, and inflation for each year from 2026 to 2028 and over the longer run.

The Federal Reserve Board members and Federal Reserve Bank presidents project that U.S. median GDP growth will be 2.2 percent in 2026, lower than the March projection of 2.4 percent. The median unemployment rate will be 4.3 percent in 2026, down from the March projection of 4.4 percent. Their GDP growth and unemployment projections for 2027 are at 2.3 percent and 4.3 percent, respectively, unchanged from the March projection.

As for inflation based on the personal consumption expenditures price index, FOMC meeting participants project it at 3.6 percent for 2026 and 2.3 percent for 2027, both higher than the March projections of 2.7 percent and 2.2 percent, respectively.

Yet new Fed Chairman Kevin Warsh confirmed at his first press conference as Fed chief that he did not submit a projection.

Financial markets "perform best when they react to incoming data" instead of trying to predict the Federal Reserve's next move, he said.

In response to questions about his views on the Fed's 2-percent inflation target, Warsh said it remains the bank's long-held position. "I see no reason until we have reestablished our commitment and ability to deliver on the 2-percent inflation objective to revisit that."

Warsh reiterated that the Fed is committed to bringing inflation back down to 2 percent, a level it has not been at for half a decade. "The commitment to deliver is strong, unanimous, and unambiguous, and that's I think an important message we've missed for five years, and we're going to fix that," he said.

Following the Fed's decision to keep rates unchanged, U.S. stock prices closed lower, while the U.S. dollar index rose and gold prices tumbled.

Phoenix Futures and Options President Kevin Grady expects the Fed to continue to let the data dictate monetary policy, adding that he does not expect to see a major shift in tone from former Fed Chair Jerome Powell to Warsh.

"The Fed can no longer claim there is a balance of risks; inflation is the problem," certified financial planner Stephen Kates, an analyst at Bankrate, told CNBC.

At Wednesday's press conference, Warsh also announced the establishment of five new independent task forces to overhaul the central bank's policy approach: Fed communications, including reconsidering the Fed's quarterly Summary of Economic Projections; the Fed's balance sheet; the Fed's use and reliance on existing data sources; productivity and jobs in an era of transformation and the Fed's inflation frameworks.

More information about the task forces will be provided in the coming days, he added.

Goldman Sachs Research has ruled out any rate cuts in 2026. David Mericle, Goldman Sachs' chief U.S. economist, has pushed his projection for the final two rate cuts in this cycle to June and December 2027.

Citigroup's top U.S. economist Andrew Hollenhorst, however, is sticking with his forecast for three 25-basis-point rate cuts in September, October and December 2026.