The Federal Reserve has decided to leave interest rates unchanged at 3.50% – 3.75% after its latest Fed meeting on Wednesday. Inflation fears remain on the Fed’s agenda, even with new Fed Chair Kevin Warsh previously favoring heavy cuts. Out of the 12 voting policymakers, three “preferred” a quarter-percentage-point hike, according to the Central Bank.
In a press conference following the Fed meeting, Fed Chair Kevin Warsh praised policymakers for engaging in a ‘real family fight‘ and committed to bringing inflation back down to the 2% target. “This Fed will not waver,” he said. Additionally, the Fed’s statement after its decision noted that economic activity is “expanding at a solid pace,” saying, as it did in June, that job gains “have kept pace with the workforce, and the unemployment rate has changed little.”
“I wouldn’t characterize what we did as anything like a pause,” Warsh noted in his press conference. “I would characterize what we did as a rigorous review of the economic situation.” The Fed didn’t lower rates or raise them. It held steady. It’s taking a beat. It is, in other words, on pause.
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Following the meeting, Wall Street did not react well, with several indexes taking a hit. The Dow sank by 1,153 points, and the 30-year Treasury yield hit its highest level since 2007 as investors worried the Fed was not acting quickly enough to bring down stubborn inflation. This also comes just days after mortgage rates in the US spiked to highs not seen in almost a year. Furthermore, the S&P 500 sank 1.52%, and the tech-heavy Nasdaq dropped 1.74%. The Nasdaq is down about 9.8% since its record high in early June, putting it on the brink of a correction (a drop of 10% from a recent peak).