Federal Reserve holds rates steady in a divisive vote

Washington: The Federal Reserve held interest rates steady on Wednesday, but in its most divided decision since 1992 noted rising concerns about inflation in a policy statement that drew three dissents from officials who no longer feel the US central bank should communicate a bias towards lowering borrowing costs.

A fourth dissent at the meeting came in favour of a quarter-percentage-point rate cut.

"Inflation is elevated, in part reflecting the recent increase in global energy prices," the Fed said in its policy statement, a shift from previous language saying inflation was just "somewhat" elevated. "Developments in West Asia are contributing to a high level of uncertainty about the economic outlook."


The 8-4 vote was the most divisive since October 6, 1992, and shows the breadth of opinion incoming Fed Chair Kevin Warsh will face in pursuing rate cuts that President Donald Trump says he expects from his chosen successor to Jerome Powell, whose term as central bank chief ends on May 15.

Powell says he plans to remain on the board of the Federal Reserve after his term as chair ends next month "for an undetermined period of time."

Though the latest policy statement retained language about how the Fed would assess the "extent and timing of additional adjustments" to rates, a phrase that pointed to future cuts as the next likely move, three policymakers objected.

Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan, while supportive of holding the policy rate steady in the current 3.50%-3.75% range, "did not support inclusion of an easing bias in the statement at this time" and voted against the new statement.