Federal Reserve Holds Rates Steady as Inflation Outlook Remains Mixed

The U.S. Federal Reserve kept its target federal funds rate unchanged at 3.5%‑3.75% following Chairman Kevin Warsh’s testimony before Congress. Warsh reaffirmed the Fed’s commitment to a 2% inflation goal and highlighted that the economy continues to expand, with solid consumer spending, rising manufacturing output and a resilient labor market, though the housing sector lags.

The Fed’s latest Beige Book shows economic activity improving and price growth easing slightly, but notes that renewed U.S.–Iran tensions have lifted oil prices, reviving inflation concerns. Core inflation remains near 2.9% and headline CPI eased to 3.5% in June, prompting some analysts to view a rate hike as more likely than a cut at the next meeting.

Warsh also discussed the growing impact of artificial‑intelligence‑related investment on the economy and its potential effects on inflation and employment. The Fed announced new task forces to review communications, balance‑sheet policy, data usage, productivity, employment and inflation frameworks, and it has added three Indian experts to its task‑force lineup.