Fed Chair Kevin Warsh answer questions for less than 30 minutes for press conference, about 22 minutes, after Federal Reserve raise benchmark interest rate by 0.25 percentage point. Target overnight federal funds rate now 3.75-4 percent. All twelve members vote yes, according to CNBC.
Warsh and other policymakers no dey happy with current inflation rate. Statement after meeting short well well, only 130 words. E shorter than July statement wey get 166 words, and same as June statement. After that, Warsh hold press conference and answer journalists questions for about 22 minutes.
Warsh talk say since July meeting, three factors change: economy stronger, inflation dey persist, and geopolitical tension increase. He say all three factors lead to unanimous decision. Inflation na highest priority for Fed. He stress say price stability na cornerstone of economic growth. He talk say today decision na important step, and part of am na to reverse earlier easing.
Fed no fit prevent price shocks for commodities like oil by itself, but central bank get role to stop inflationary pressure. Wetin Fed can and will do na make sure changes in relative prices no spread and cause indirect effects for economy. Gasoline prices for United States reach record high during recent Labor Day. Diesel reach new record high per gallon on September 16 US time. Fuel prices surge because of conflict with Iran, and e dey increase costs for consumers and businesses.
Warsh no give details about future rate decisions of Federal Open Market Committee, FOMC. He say he no responsible for determining future policy directions. Today decision na careful, serious and responsible one, wey dem prepare and think about for last 120 days. For latest economic projections, Fed officials expect one more rate hike later this year, then pause. Dem also predict say no further rate hikes go happen for 2027. September 16 decision na first major rate hike under Warsh, and he don repeatedly emphasize say he dey act independent. This rate hike fit put am in conflict with US President Donald Trump. Warsh talk say market no influence the decision. He say dem take decision today based on assessment of situation, labor market trends and strength of economy.
Fed meeting happen after months of conflict for Middle East, wey dey push energy prices and threaten to wake inflation and spread am. Fed recommended inflation index for August go release later this month, but Cleveland Fed estimates suggest inflation between August and early September likely rise, according to CNN. For new estimate wey dem publish this week, US Congressional Budget Office, CBO, predict say conflict with Iran early next year go increase inflation by about 0.5 percentage point. CBO cite inflationary pressure from reduced oil and natural gas supplies through Strait of Hormuz, plus shipping disruptions for Red Sea. Reporter ask Warsh about President Donald Trump call to lower borrowing costs. Warsh no clear whether he agree or disagree, but he stress importance of Fed policy independence. He say he no get anything to tell about him conversations with president, and he no be Wall Street news medium. He add say part of Fed independence na to stay within boundaries of im powers. Central bank president say he go let those responsible for trade and budget policy do their tasks for assigned areas. Trump recently criticize Fed Board of Governors well well, call am political and hostile. Fed rate decisions no dey taken only by Board of Governors, but by broader group inside central bank.
Wall Street try recover on Thursday after big losses on Wednesday. US stock futures dey clearly higher after Fed raise rate on Wednesday. Dow futures rise 306 points. S&P 500 futures gain 0.57 percent and Nasdaq 100 futures climb 0.65 percent. Dow Jones lose more than 630 points on Wednesday, a drop of 1.2 percent. S&P 500 fall 0.5 percent and Nasdaq Composite close slightly lower.
Rate hike itself largely expected. For investors, main question na wetin go happen next. Fed raise rate by 0.25 percentage point to 3.75 to 4.00 percent and keep possibility of another hike later this year open. Warsh talk say inflation still too high, so he no close door for another hike later this year. That make investors nervous. One-time hike market fit handle. But if this na start of new tightening cycle, picture go change. Higher rates dey affect consumers, companies and governments. Loans go cost more, valuations go face pressure and economic growth go dey weaker.
On top that, oil remain major disturbant. US inflation for August reach 3.4 percent. Oil still trade above 100 dollars per barrel. Brent fall small on Thursday morning to 105.81 dollars and WTI drop to 102.22 dollars. That happen as worries about supply problems reduce small. Saudi Arabia suppose make extra oil available for Asian refineries through ship-to-ship transfers near Oman. With that, Saudi Arabia dey try limit impact of attacks on East-West pipeline. But as long as oil stay above 100 dollars, inflation pressure remain. And as long as inflation pressure remain, Fed no go fit really soft.
