Fed holds interest rates steady as three policymakers demand hike

By Doloresz Katanich with AP & AFP

The US Federal Reserve on Wednesday held interest rates in the world's largest economy steady, with three of the 12 voting policymakers dissenting from the majority decision and calling for a quarter-percentage-point rate hike.

The Fed held its target range at 3.50-3.75% for the fifth straight meeting, repeating its previous assessment of inflation, unemployment and economic activity. It described inflation as “elevated”.

Economists had largely expected the Fed to leave rates unchanged, although financial markets continue to see a significant chance of an increase in September.

Richard Carter, head of fixed interest research at Quilter Cheviot, said: “While there had been speculation that the Federal Reserve would take the nuclear option and in fact raise interest rates at this latest meeting, it continues to leave the option in its back pocket just in case it gets spooked about the path for inflation and has to break the glass.”