Fed Holds Rates at 3.5–3.75% in Unanimous Vote at Kevin Warsh’s First Meeting

The Federal Reserve held its benchmark interest-rate target steady at 3.5% to 3.75% on Wednesday in a unanimous vote at the first policy meeting chaired by Kevin Warsh, signaling continuity in monetary policy as officials said inflation remains too high and pointed specifically to energy-related supply shocks. In its June 17 statement, the Federal Open Market Committee said it “decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent.”

The central bank said the economy continues to grow and the job market remains stable even as price pressures persist. The FOMC said, “Economic activity is expanding at a solid pace” and that “Job gains have kept pace with the workforce, and the unemployment rate has changed little.” But it also underscored that inflation is still running above its goal, saying: “Inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee will deliver price stability.”

The 12-0 vote stood out not only because it kept policy unchanged, but because it was the first rate decision under Warsh, who was sworn in as Fed chair and as a member of the Board of Governors on May 22. It also marked a more unified committee than at the previous meeting on April 29, when the Fed likewise left rates unchanged at 3.5% to 3.75% but recorded dissents. Wednesday’s decision suggests an early measure of policy continuity under the new chair at a moment when inflation remains the central concern.

Alongside the rate decision, the Fed reaffirmed the operating settings used to keep short-term rates within the target range. The Board of Governors voted unanimously to keep the interest rate paid on reserve balances at 3.65%, effective June 18, and to hold the primary credit rate at 3.75%. The FOMC also said it had “reaffirmed its policy of maintaining ample reserves in the banking system.” In a related implementation note, the committee directed the New York Fed’s trading desk to “Undertake open market operations as necessary to maintain the federal funds rate in a target range of 3-1/2 to 3-3/4 percent.” The Fed said it would continue securities operations, including Treasury bill purchases when appropriate and reinvestment and rollover of principal payments under its existing instructions.

The inflation backdrop helps explain the Fed’s emphasis on supply shocks and energy. Data from the Bureau of Labor Statistics released June 10 showed that consumer prices rose 0.5% in May from the previous month and 4.2% from a year earlier, with energy a major driver. That context aligns with the Fed’s decision to hold rates steady while making clear that, despite solid growth and a steady labor market, inflation remains well above the central bank’s 2% target.