Fed to announce interest-rate decision amid three-year high inflation
The Federal Reserve is expected to keep rates unchanged on Wednesday, though markets see a growing chance of a hike later in the year as inflation reaches its highest level in three years.
The Federal Reserve will announce its latest interest-rate decision on Wednesday as inflation climbs to a three-year high. The meeting marks the first policy move under new chair Kevin Warsh, who took office last month. Futures markets, measured by the CME FedWatch Tool, show a strong consensus that the benchmark rate will remain between 3.5% and 3.75%, but they assign roughly a 40% probability to a quarter-point increase in December.
The outlook shift follows a robust jobs report for May, suggesting the labor market could tolerate tighter monetary policy. Inflation rose for a third consecutive month in May, exceeding 4% as the conflict in the Middle East disrupted oil supplies through the Strait of Hormuz. A U.S.–Iran agreement announced earlier this week aims to reopen the strait, prompting a decline in oil prices.
Warsh, known for a hawkish stance on rates, will address reporters after the decision. He previously warned that high inflation can harm citizens, particularly low-income households. Former Fed Chair Jerome Powell will also vote on the policy, remaining on the board after his chairmanship ends amid an ongoing investigation into a prior office-renovation probe.
Analysts note that while the current rate is lower than the 2023 peak, it remains well above the near-zero levels seen at the start of the COVID-19 pandemic.
