The Federal Reserve opted to keep interest rates unchanged on Wednesday in its first major decision under President Trump’s hand-picked chairman, Kevin Warsh.
The Federal Open Market Committee kept its benchmark rate at 3.5%-3.75%.
“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East,” the committee said. “Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
Mr. Trump appointed Mr. Warsh to replace outgoing Chair Jerome Powell with an eye toward lower rates, but central bankers are confronting stubborn inflation that was exacerbated by the war in Iran.
“Inflation remains elevated relative to the committee’s 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy,” the Fed’s committee said.
Speaking at his first press conference, Mr. Warsh said high prices are a burden for everyday Americans. He offered a dose of optimism about costs, saying the Fed would pursue its 2% target.
“The recent past need not be prologue,” Mr. Warsh said. “This committee will deliver price stability.”
The Fed has a dual mandate to maintain maximum employment and keep prices stable.
Earlier this year, it left interest rates unchanged after implementing three small cuts in late 2025 to help a sluggish labor market.
The president hectored the former chairman, Mr. Powell, to cut rates, saying it would spur economic growth.
But central bankers were skittish about potential inflation from Mr. Trump’s tariffs, and then the war in Iran nudged up energy prices and overall inflation.
Mr. Powell gave way to Mr. Warsh weeks ago, though high prices remain a concern.
Prices rose 4.2% for the year ending in May as inflation hit a three-year high, the government said in its most recent Consumer Price Index report.
Mr. Trump negotiated a deal to end the conflict in the Middle East. Still, some of the economic shocks from the war will take time to heal.
The president gave conflicting signals to the Fed when he swore in Mr. Warsh during a White House ceremony in May.
“We want to stop inflation, but we don’t want to stop greatness,” Mr. Trump said, signaling his preference for lower rates.
However, Mr. Trump told Mr. Warsh to be “totally independent” in his new role.
“I want him to be independent and just do a great job,” Mr. Trump said in the East Room. “Don’t look at me, don’t look at anybody. Just do your own thing and do a great job.”
Mr. Warsh said he is setting up task forces to take a new look at five areas: Fed communications; the Fed’s balance sheet; the bank’s use of existing data sources; productivity and jobs in an era of innovation; and the Fed’s inflation frameworks.
“These subjects are timely, consequential and, in my view, worthy of a fresh look,” Mr. Warsh said.
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