The Federal Reserve left interest rates unchanged for a fifth consecutive meeting while signaling its commitment to bringing inflation back to its 2% target.
Meanwhile, President Donald Trump warned Iran would “get a beating” after an attack on a US military base in Jordan, fueling renewed geopolitical tensions.
Gold prices rallied after the Fed’s decision as investors welcomed the lack of a surprise rate hike, while oil prices surged nearly 8% as escalating conflict in the Middle East reignited supply concerns.
Fed keeps interest rates unchanged as policymakers remain focused on inflation
The Federal Reserve voted 9-3 to leave the benchmark federal funds rate unchanged at a range of 3.5% to 3.75%, marking the fifth straight meeting without a rate change.
Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed President Neel Kashkari dissented in favor of a quarter-percentage-point rate increase, reflecting growing concern among some policymakers that inflation remains too high.
Fed Chair Kevin Warsh rejected the notion that keeping rates unchanged reflected complacency, stressing the central bank remains committed to restoring inflation to its 2% target.
“There is no soft inflation target,” Warsh told reporters. “There is no soft implicit target, not on this committee’s watch.”
The Federal Open Market Committee repeated language from its June statement, saying it would “deliver price stability.”
It also described economic activity as expanding at a “solid pace,” citing strong productivity growth, capital investment and a stable labor market, while continuing to characterize inflation as elevated.
Warsh said higher interest rates “could well be part of the solution” if inflation remains elevated during the forecast period, although he stopped short of signaling an imminent hike.
He also argued that higher Treasury yields since the last meeting have already tightened financial conditions, reducing the need for immediate policy action.
Trump warns Iran after renewed attacks in the Middle East
Geopolitical tensions escalated after President Donald Trump vowed retaliation against Iran following what he described as an attack on a US military base in Jordan.
“We’ll be hitting them hard,” Trump told Fox News, adding that Iran was “going to get a beating.”
The latest escalation followed renewed military exchanges involving the US, Iran and Iran-backed groups across the Middle East after a brief pause in hostilities.
Iranian media reported that the Islamic Revolutionary Guard Corps targeted a base in Jordan, while the US and Saudi Arabia launched strikes against Iran-backed militants in Iraq after drone attacks targeted Saudi oil facilities.
Drone attacks also struck two liquefied natural gas vessels at Egypt’s Damietta port, according to maritime security firm Ambrey. Egyptian authorities said the resulting fires were extinguished and no injuries were reported.
The renewed fighting has raised concerns over disruptions to energy supplies through the Strait of Hormuz, where shipping activity remains heavily constrained.
Iran reportedly rejected an Omani proposal for joint management of the waterway, insisting on sole control over vessels entering the Persian Gulf.
Gold rises after Fed avoids surprise rate hike
Gold prices climbed following the Fed’s decision to keep interest rates unchanged, as investors welcomed the absence of a surprise tightening despite the central bank’s continued hawkish stance.
Spot gold rose more than 0.83% to trade around $4,060.49 an ounce after initially jumping about $40 following the policy announcement.
Markets had entered the meeting expecting roughly a 30% chance of a rate increase after inflation concerns resurfaced in recent weeks.
The Fed also maintained its tightening bias while offering no forward guidance under Warsh’s leadership, leaving future policy decisions dependent on incoming economic data.
Oil prices surge on fears of supply disruption
Oil prices rallied sharply Wednesday as renewed conflict in the Middle East heightened concerns over global crude supplies.
Brent crude settled up $6.46, or 7.68%, at $90.53 per barrel, while US West Texas Intermediate crude rose $5.44, or 6.86%, to finish at $84.68 per barrel.
The gains were driven by renewed military action involving the US, Iran and regional allies, as well as continued disruptions to shipping through the Strait of Hormuz.
Additional support came after the US Energy Information Administration reported that domestic crude inventories fell by 7.2 million barrels to 404.5 million barrels, the lowest level since 2018, well above expectations for a 1.3 million-barrel draw.
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