US interest rates have been held for the fifth time in a row by the Federal Reserve.
The decision, which was broadly expected, means rates remain between 3.5% and 3.75%.
Higher interest rates make borrowing more expensive for people wanting to secure loans, mortgages and credit cards, but can lead to better returns on savings.
Policymakers decided to keep rates at the level they have been since December last year after inflation, the rate at which prices rise, slowed last month, but concerns remain that the dip could prove short-lived.
Despite inflation falling to 3.5% in the year to June, the rate prices are rising at remains above the Fed’s 2% target, as it has been for more than five years. The lower rate of inflation last month does not mean prices are falling, but that they are rising at a slower rate.
There is also growing uncertainty over the impact of the ongoing conflict in the Middle East on global oil prices and subsequently general consumer prices in the coming months. On Wednesday, Brent crude, the global benchmark for oil prices rose by more than 6% to above $89 a barrel.
The Fed acknowledged that inflation remained “elevated” which it said was in part due to energy price increases, but said US economic activity was expanding at a “solid pace” despite uncertainty caused by the conflict in the Middle East”.
But policymakers at the US central bank voted 9-3 in favour of keeping interest rates on hold. The three who voted against were pushing instead for a small hike, with speculation ahead of the decision that an increase in the rate was on the cards due to renewed hostilities between the US and Iran pushing up global oil and food prices.
Asked why the Fed did not rates, Warsh said that, while there was “impatience” being felt by households and businesses over high prices, his board had only been in position for eight-and-a-half weeks.
“We are on the job, we will deliver, we are focused like a laser on making sure we can do it, but the suggestion we are going to be able to wave with our magic wand is one I want to disabuse you and everyone else of,” he told a press conference.
Warsh said he had wanted to and succeeded in having a “family fight” with his fellow policymakers on the rates decision.
“I asked for a good family fight, and I got one. That’s the purpose. That’s the design feature,” adding that “there was a large majority support for the decision that we made in the room”.
