Fed holds key rate at 3.5–3.75% amid accelerating inflation
The economy always walks a tightrope: a rate that is too low fuels prices, while one that is too high stifles growth. When inflation stubbornly refuses to return to target, and external shocks — the closure of the Strait of Hormuz, tariff wars and surging AI related demand — keep pushing prices up, central banks are forced to pause and watch events unfold. The FOMC's decision to keep rates unchanged is not inaction but a wait and see stance amid high uncertainty.
On Wednesday, the US Federal Reserve released the minutes of the 16–17 June meeting of the Federal Open Market Committee (FOMC), showing that all members voted to keep the target range for the federal funds rate at 3.5 to 3.75 percent. Participants noted that inflation had accelerated further and remained well above the Fed's 2 percent target. They cited rising core and headline inflation, identifying as key factors the lingering effects of tariffs, supply chain disruptions caused by the closure of the Strait of Hormuz, and strong demand for certain goods and services driven by the development of artificial intelligence.
The FOMC minutes are a detailed account of the discussions among Fed policymakers, released three weeks after each scheduled meeting. They give markets insight into the regulator's internal thinking and possible future actions. The current pause in rate hikes comes amid mixed data: on one hand, inflation remains high; on the other, the economy shows signs of slowing.
The minutes pay particular attention to external factors: the closure of the Strait of Hormuz — through which about 20% of global oil supplies pass — and tariff restrictions continue to disrupt supply chains, while the AI boom creates additional demand for chips, electricity and equipment, all of which also affects prices.
As CCTV+ reports. Markets interpreted the minutes as a signal that the Fed is in no hurry to tighten further, but retains the option of raising rates if inflation does not begin to decline sustainably.
