The US Federal Reserve has held the benchmark interest rate steady and policy makers expect a hike in borrowing costs later this year amid growing concerns about inflation lodged above the United States central bank's two per cent target.
New quarterly projections showed nine Fed officials anticipate a rate hike by the end of 2026 and an updated policy statement removed language that had been used to flag the likelihood of further reductions in borrowing costs in 2026.
Indeed, the statement, in an early sign of new Fed chairman Kevin Warsh's influence, removed any guidance about future rate moves altogether, with a revised format that simply stated the rate decision and reaffirmed the central bank's intent to keep "ample reserves in the banking system."
The shortened document, a return to a format similar to that used by former Fed chairman Alan Greenspan, was approved by a unanimous 12-0 vote.
The statement showed other signs of Warsh's early influence on the debate as he takes over after being appointed earlier this year by President Donald Trump with an expectation that he would deliver the rate cuts the president has demanded.
The description of the economy touched on issues Warsh has emphasised, mentioning that "productivity growth and capital investment are strong".
While acknowledging that inflation was "elevated relative to the Committee's 2 percent goal," that was assigned in part to "supply shocks that have driven price increases in certain sectors, including energy".
New projections show inflation slowing sharply next year.
"The Committee will deliver price stability," the statement said.
Only 18 of 19 policymakers submitted rate projections, and while the missing "dot" is not identifiable, it was presumably withheld by Warsh, who is only about three weeks into the job and has been critical of the Summary of Economic Projections.
The statement marks a turning point not just in leadership at the central bank but in a monetary policy outlook that since the northern hemisphere autumn of 2024 had been geared to lower borrowing costs from the elevated rates used to help tame inflation that hit 40-year highs during the COVID-19 pandemic.
Projections among officials showed the policy interest rate, set in the 3.50 per cent-3.75 per cent range since December, would rise by the end of this year.
The outlook for inflation was marked up from 2.7 per cent for the end of 2026 to 3.6 per cent, before falling to 2.3 per cent next year, all without a rate increase - consistent with the statement language attributing high prices to supply disruptions that would typically be expected to pass.
Growth was marked down slightly, with the unemployment rate expected to end the year at 4.4 per cent, the same as in the Fed's March projections.
