US Federal Reserve holds interest rates steady at 3.75%-4.00%

Decision comes amid rising inflation and ahead of US midterm elections

The US Federal Reserve decided to maintain its benchmark interest rates between 3.75% and 4.00% on Wednesday, just days before the crucial midterm elections in the United States. This decision comes despite the ongoing surge in inflation within the world’s largest economy, which has been exacerbated by various factors including geopolitical tensions and technological investments.

According to the CME Group’s FedWatch tool, most investors had anticipated this outcome, following the Fed’s recent 25 basis point increase last month, marking the first rate hike in three years. The Federal Reserve has consistently missed its long-term inflation target of two percent for over five years, as households and businesses continue to grapple with persistent price increases.

US President Donald Trump’s recent military actions against Iran, initiated in late February, have significantly contributed to soaring energy prices, further fueling domestic inflation. Additionally, Trump’s expansive tariff policies and the investment boom in artificial intelligence (AI) technology, along with the construction of large data centers, have also driven prices upward.

The Fed’s decision arrives six days before the November 3 midterm elections, where the Democratic Party aims to gain control of both houses of Congress from the Republicans. Economic management under President Trump has been a focal point of the campaign, with many working-class households struggling financially despite overall stable economic growth.

In September, US consumer inflation exceeded expectations, reaching 3.7%, nearing the three-year high recorded in May. However, key policymakers at the Federal Reserve, including Chairman Kevin Warsh, have indicated no immediate urgency to implement another rate hike.

Source: https://gulfnews.com/business/banking/us-federal-reserve-leaves-interest-rates-unchanged-ahead-of-key-midterm-elections-1.500727496