Kevin Warsh, Chair of the U.S. Federal Reserve [Reuters=Yonhap News]

The U.S. Federal Reserve (Fed) decided on the 29th (local time) to hold its benchmark interest rate steady at 3.50–3.75%.

The Fed announced that it reached this decision following the conclusion of its regular Federal Open Market Committee (FOMC) meeting that day.

This marks the fifth consecutive freeze, following those in January, March, April, and June of this year. It is also the second consecutive rate freeze since Kevin Warsh took office as Chair of the Federal Reserve.

The Fed stated that the decision to maintain rates was passed with a vote of 9 to 3 among the 12 FOMC members.

This contrasts with the previous FOMC meeting in June, where the decision to freeze rates was unanimous.

The Fed reported that Beth Hammack, Neel Kashkari, and Lorie Logan cast dissenting votes, advocating for a 0.25 percentage point (p) rate hike.

This appears to reflect the recent intensification of the conflict between the U.S. and Iran, which has driven up international oil prices and caused U.S. domestic inflation to surge once again.

The fact that the interest rate futures market had priced in a one-third probability of a "surprise hike" just before the decision was announced may have also been influenced by this internal FOMC atmosphere.

In the interest rate projections released after last month’s FOMC meeting, the Fed had predicted one rate hike within the year. With rates held steady at this meeting, the market is now forecasting a high probability of a 0.25%p increase at the upcoming September FOMC meeting.

The Fed's policy statement on this day was nearly identical to the one issued last month. The only differences were a slight change in wording, the vote count for the interest rate decision, and the identification of the dissenting members who favored a hike.

The Fed stated, "Economic activity is expanding at a solid pace despite heightened uncertainty caused by Middle East conflicts and other factors."

It added, "Productivity growth and capital investment are strong. Job gains are in line with the labor force, and the unemployment rate shows little change."

Furthermore, the Fed noted, "Inflation remains high relative to the FOMC's 2% goal, partly due to supply shocks that have driven price increases in specific sectors like energy," adding that "the Committee is committed to achieving price stability."

In a press conference following the announcement, Chair Warsh stated, "There is only one goal, and that is (an inflation rate of) 2%."

The Fed pursues a "dual mandate" of "maximum employment" and "price stability," and the intention here is to focus on curbing domestic inflation caused by the global energy supply shock resulting from the war with Iran.

Chair Warsh emphasized, "Some households, businesses, and market experts have been left with a persistent and incorrect impression that the Fed's implicit inflation target is higher than 2% due to high inflation over the past five years," adding, "There is no such thing as a relaxed inflation target."

Given that U.S. President Donald Trump has consistently pressured for interest rate cuts, it is unlikely he will be satisfied with the Fed's decision to maintain rates.

When asked by reporters at the White House whether he was "disappointed in Chair Warsh regarding the decision to freeze rates," President Trump replied, "No. Kevin is fantastic. He is an excellent and brilliant man."

However, President Trump added, "He (Warsh) has a board," stating, "I knew he would want to lower rates, but he has a political board, and they want to keep rates high," criticizing the members who have opposed rate cuts.

Meanwhile, with the Fed’s decision to keep rates unchanged, the interest rate gap between South Korea (2.75%) and the United States remains at 1.00 percentage point at the upper bound.

The Bank of Korea's Monetary Policy Board raised its benchmark interest rate by 0.25 percentage points from 2.50% to 2.75% on the 16th.