The Federal Reserve left interest rates unchanged in the first policy decision under its new chairman, Kevin Warsh, who used the meeting to open a broad review of how the central bank sets and communicates policy. Officials chose to keep rates steady even though inflation remains stuck well above the Fed's target. The decision was framed as the start of a new era for United States monetary policy.
Warsh announced that rates would stay where they are despite longstanding public pressure from President Trump for the Fed to cut. He has indicated that he intends to keep the central bank independent and to act on what the economic data shows rather than on political demands. In its assessment, the Fed said economic activity is expanding at a solid pace.
Alongside the rate decision, Warsh established a task force to review the central bank's policies, an effort that officials said could reshape how the Fed reaches its decisions and how it explains them to the public. The review was described as ambitious and far reaching, aimed at the core of how the institution operates and communicates.
The new chairman has signalled that he wants significant changes to how the Fed works. During his confirmation hearing earlier in the year, he indicated he wants to downsize the workforce. He also said he dislikes forward guidance and believes the central bank should not preview its future rate decisions, a notable departure from recent practice.
The decision comes against a backdrop of growing internal disagreement. Over the last several meetings, the dissent around the main policy choice has continued to grow, and there were calls for Warsh to bring officials together and set a clear course forward. Easing that division is now one of his earliest challenges as chairman.
The recent war involving Iran has added uncertainty to the outlook for any future rate cuts. While an initial deal has been announced that could bring the conflict to an end, it is not yet clear that it will hold. Even if oil begins to flow more freely again, officials cautioned that it could take months for consumer prices to come down.
For now, the Fed has chosen to wait, holding policy steady while it studies how it works. Households, businesses and markets will be watching how the review develops and whether the new leadership shifts the path of interest rates in the months ahead, particularly with inflation still above target and the economic picture clouded by events abroad.