The US central bank is expected to keep interest rates unchanged at its policy meeting next week amid soaring energy prices and disruptions in supply chains triggered by the war in Iran. The Federal Reserve’s two-day meeting starting Tuesday could be Chairman Jerome Powell’s last at the helm of the independent institution.
Despite multiple attempts by the Donald Trump administration asking the Fed to revise the interest rates, its chair, Powell, has consistently rejected the idea due to rising inflation and job market worries that could destabilise the country’s overall economy.
According to officials, the Fed rates are expected to remain unchanged between 3.50 per cent and 3.75 per cent, extending their pause since the start of the year.
“We still have a very high level of uncertainty on what’s happening in the Middle East,” KPMG senior economist Kenneth Kim told reporters here on Sunday.
Oil and gasoline prices remain elevated even if they have peaked, meaning “there’s certainly an energy shock that’s still impacting both consumers and businesses,” he said.
The closure of the Strait of Hormuz has also triggered a price rise in fertilisers, and disruptions threaten to hit food production. US inflation has now climbed to 3.3 per cent as energy prices have skyrocketed.
President Donald Trump has made no secret of his wish for lower interest rates and regularly slammed Powell for not cutting them aggressively.
Powell’s term as chairman expires on May 15, and he originally intended to stay on the Fed’s board of governors until the probe into him is completed. All eyes are on his future plans at his scheduled press briefing on Wednesday.
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