WASHINGTON — In a decisive shift that signals a departure from previous policy, the U.S. Federal Reserve decided to keep the benchmark interest rate unchanged at 3.50%–3.75% during its Federal Open Market Committee (FOMC) meeting on Wednesday. While this marks the fourth consecutive hold this year, the Fed's newly released "dot plot" suggests a turn toward a more hawkish stance under the leadership of new Chair Kevin Warsh.
The highlight of the FOMC meeting was the notable upward revision in the interest rate outlook. The median projection for the federal funds rate at the end of this year was raised from 3.4% in March to 3.8%. Out of 18 committee members, nine now expect at least one rate hike before the end of the year—a stark contrast to the March meeting, where no members forecasted an increase and 12 anticipated a rate cut.
The pivot stems from growing concerns over persistent inflationary pressure. The Fed significantly hiked its projection for the Personal Consumption Expenditures (PCE) price index to 3.6% for the year, up from the previous 2.7%. Conversely, the economic growth outlook was dampened, with the real GDP forecast lowered by 0.2 percentage points to 2.2%.
In a move reflecting Chair Warsh’s personal policy philosophy, the FOMC removed all language hinting at an "easing bias" from its policy statement. During the subsequent press conference, Warsh emphasized that the statement is intended to convey facts as they stand rather than provide forward guidance. "We focused on communicating the current situation accurately," Warsh noted.
The Fed’s decision maintains the interest rate gap between the U.S. and South Korea at 1.25 percentage points. Meanwhile, U.S. President Donald Trump addressed the news by expressing indifference toward the rate freeze, but issued a subtle warning regarding the possibility of future hikes, stating that "raising rates will only stifle the economy."
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