The US Federal Reserve held its benchmark federal funds rate steady at 3.50%-3.75% for a third consecutive meeting, citing elevated inflation alongside a weakening labour market. The decision came on an unusually divided 8-4 vote.
Growth and inflation
The US economy expanded at an annualised 1.6% in the first quarter of 2026, below the roughly 2.0% trend, with AI infrastructure investment the largest contributor. Inflation has stayed elevated, partly reflecting a recent surge in global energy prices tied to geopolitical conflict.
Jobs and the path ahead
Job gains have remained low on average and unemployment has changed little in recent months, though the Fed expects a slight rise in the jobless rate later in 2026. Financial markets no longer price in a rate cut this year or next, instead placing some odds on a hike by December or early 2027.
Attention now turns to the Fed's upcoming meeting — its first under new Chair Kevin Warsh — where a hold is widely expected as the oil-price threat fades.
Sources: Federal Reserve, San Francisco Fed (FedViews), Gulf News.