26/04/29
US Fed holds target rate steady on oil
Adds Powell comments, background Houston, 29 April (Argus) — US Federal Reserve
policymakers held their target interest rate unchanged Wednesday, noting that
inflation is "elevated" on the back of the Mideast Gulf war. "There's headline
inflation coming out of the Gulf and we don't know how much that will be,"
outgoing Fed chair Jerome Powell said in his final press conference. "We think
our policy stance is in a very good place for us to wait and see." The Fed's
Federal Open Market Committee (FOMC) kept the federal funds rate at 3.5-3.75pc
in its third meeting of 2026, following quarter-point cuts in September, October
and December last year. "Developments in the Middle East are contributing to a
high level of uncertainty about the economic outlook," the FOMC said in a
statement. "The Committee is attentive to the risks to both sides of its dual
mandate" of maintaining low inflation and fostering maximum employment. Of the
12 voting FOMC members, four voted against the decision, with one voting to cut
the rate and three voting against the "easing bias" language in the statement.
Those were the most dissenting votes since 1992. Powell, whose term as chairman
expires on 15 May, said he would stay on as a Fed governor until a federal
investigation into alleged cost overruns at a Fed building upgrade is "truly
over with finality and transparency". The Justice Department recently closed its
criminal investigation but Powell said the US attorney for the District of
Columbia or the Federal Reserve's own watchdog could reopen the probes, which he
has said were originally whipped up by Trump as part of an effort to undermine
Federal Reserve independence. "The institution is being battered over these
things," he said. "It's not so much independence. It's really the ability to do
monetary, to make monetary policy without political considerations." Powell
congratulated Kevin Warsh, a former Fed governor and Trump's nominee to replace
him at the helm of the Fed, for advancing out of the Senate Finance Committee
earlier Wednesday for a final full Senate confirmation vote. "Misbehaving"
inflation "The labor market shows more and more signs of stability, whereas
inflation is kind of misbehaving," Powell said. "So we can wait here and see how
things work out before we act" to move rates. US GDP growth is on track to have
risen by a 1.8pc annual pace in the first quarter from just 0.5pc in the fourth
quarter, according to Pantheon Macroeconomics ahead of a government report
Thursday. Still, job growth in the first three months of 2026 averaged just
68,000/month. Meanwhile, inflation risks have surged on the war, with year-ahead
inflation expectations rising to 4.7pc in the University of Michigan's latest
consumer sentiment survey for the end of April, up from 3.8pc in March. The Fed,
in its latest median economic projections released at the prior meeting in
March, continued to pencil in a single quarter-point rate cut this year,
unchanged from the prior projection in December. Policymakers still expect one
more quarter-point cut in 2027. By Bob Willis Send comments and request more
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