From BBC News · · 2m
Fed holds rates steady as economy grows faster than expected
The Federal Reserve kept interest rates at 3.75%-4% after raising them in September, citing strong economic growth but persistent inflation above its target.
In brief
The Federal Reserve kept interest rates at 3.75%-4% after raising them in September, citing strong economic growth but persistent inflation above its target. The US Federal Reserve held interest rates steady at 3.75%-4% after September's first rate rise in three years, as the economy grew faster than expected but…
Fed holds rates steady
The US Federal Reserve kept interest rates at 3.75%-4%, holding them unchanged after raising them for the first time in three years at its September meeting.
Warsh: monetary medicine is working
Fed Chair Kevin Warsh said the September rate rise was starting to work, though inflation remained too high and the central bank wanted more economic data before deciding on future moves.
“The overwhelming consensus, the overwhelming judgement, is that what we've done in this monetary medicine is starting to work some.”
Economy grows faster than expected
The US economy grew at 3.4% on an annualised basis in the three months to September, stronger than analysts expected, driven by investment acceleration and strong consumer spending.
Investment surge driven by AI
Private investment grew at an annualised rate of 19.4% in the quarter, largely due to investment in artificial intelligence, while personal spending rose 3.8% annualised.
Inflation remains above target
Prices increased 3.7% in the year to September, driven higher by fuel and energy prices which surged due to the war in Iran, staying above the Fed's 2% target.
Two committee members dissent
The decision to hold rates steady was not unanimous. Governor Lisa Cook and Cleveland Fed President Beth Hammack voted to increase rates to 4%-4.25%, while ten of twelve members voted to hold.
How rate changes affect borrowing and saving
When the Fed raises rates, banks typically increase rates on mortgages, credit cards and car loans, but also offer higher returns on savings, encouraging people to save more and spend less.
Next decision in December
The Fed's next meeting will be held over December 8-9. Chair Warsh said more economic data between now and then should paint a clearer picture of the economy's state.
“we'll be, I think, better positioned to determine the right policy decision and the stance of policy.”
The essence
The US Federal Reserve held interest rates steady at 3.75%-4% after September's first rate rise in three years, as the economy grew faster than expected but inflation remained above target.
