Central bank says implications of Iran war are ‘uncertain’

The Federal Reserve has decided to keep interest rates steady, pausing any cuts for now. On Wednesday, the central bank announced that its benchmark rate will remain near 3.6%, marking the second consecutive meeting without a change, according to the AP. Officials indicated that only one rate reduction is likely this year, citing concerns that the conflict in Iran could push inflation higher.

“Current data indicate that economic activity continues to grow at a solid pace. Job creation has been modest, and unemployment has stayed roughly the same in recent months,” the Fed said in a statement. “Inflation remains elevated, and uncertainty about the economic outlook is high. The effects of the Middle East conflict on the U.S. economy are unclear.”

Wednesday’s session was the second-to-last meeting with Jerome Powell at the helm of the Fed. While economists largely expected the bank to maintain rates, some had predicted up to three governors might oppose the decision—the highest level of dissent in decades, the Wall Street Journal reports. In the end, only Stephen Miran, one of President Trump’s three Fed appointees, voted for a quarter-point rate cut.

Other major central banks have also hit pause on rate changes this week. The Bank of Canada kept its main rate at 2.25%, noting that although inflation has hovered near its 2% target for the past year, “the war in Iran is driving oil prices sharply higher, which could lift inflation in the short term,” the CBC reports. Meanwhile, Australia’s Reserve Bank increased its key rate to 4.1% on Tuesday, returning it to pre-cut levels from last year, the Guardian reports.

Original Source