'No magic wand' to tackle high prices, Fed boss says as US interest rates held
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- Federal Reserve held interest rates at 3.5%-3.75% for the fifth consecutive meeting, with policymakers voting 9-3 to keep rates on hold
- Fed Chairman Kevin Warsh told reporters there is "no magic wand" to ease the cost of living, noting his board had only been in place for 8.5 weeks since his appointment
- Inflation stood at 3.5% in the year to June, remaining above the Fed's 2% target for more than five years, with the Fed acknowledging prices remain "elevated" partly due to rising energy costs
- Brent crude rose more than 6% to above $89 a barrel on Wednesday amid uncertainty over how the Middle East conflict could affect global energy and consumer prices
- US stock markets sold off after the decision, with the Dow Jones dropping 2.19% (its largest one-day decline), the S&P 500 hitting a one-month low, and the Nasdaq down roughly 9% from its June record high
- Warsh stressed the importance of Fed independence despite being appointed by President Trump in May, saying he "asked for a good family fight" among policymakers and got one
Why it matters: The 9-3 split vote signals Warsh's board is not unified behind the hold, and with Trump pushing rate cuts and midterms under 100 days away, the Fed's independence is on the clock — markets reacted with the Dow's largest one-day drop of 2.19%, suggesting investors read hawkish hold as a growth risk layered onto already-rising oil costs.
