Federal Reserve leaves interest rates unchanged, signals support for rate hike this year

The Federal Reserve kept its key rate unchanged Wednesday yet almost half the central bank’s policymakers said they could support a rate hike later this year, an unexpectedly aggressive outcome that would disappoint President Trump and suggests heightened concerns about persistent inflation.

In an unusually short statement after their two-day meeting, Fed officials dropped language that had suggested their next move would be to cut their key rate. The brief statement likely reflects the influence of new chair Kevin Warsh, appointed by Trump, who has previously criticized the Fed for commenting too broadly on the economy.

In a set of quarterly projections, nine Fed officials said they expected at least one rate hike this year, with six supporting two or more. It’s a sharp change from March, when no policymakers penciled in a hike and the committee as a whole forecast one cut in 2026. The change is an acknowledgement that inflation is at its highest level in three years and many officials have said in recent speeches that if inflation doesn’t decline, higher rates may be necessary as early as the end of the year.

There was another sign of how Warsh may change the way the Fed operates: He appears to not have submitted a forecast for how the Fed might change its key rate in the coming years. A chart illustrating the projections showed just 18 dots, even though there are 19 policymakers. He has previously criticized the projections for potentially locking the Fed into a specific policy outlook.

Wednesday’s policy meeting is the first for Warsh, who was appointed by Trump after the president sharply criticized Warsh’s predecessor, Jerome Powell, for not reducing rates deeply enough. The attacks largely backfired because they prompted Powell to stay on the Fed’s governing board, where he voted Wednesday in favor of keeping rates at about 3.6%.

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