U.S. Federal Reserve Holds Interest Rates Steady

The U.S. Federal Reserve kept interest rates on hold as officials consider the implications of elevated oil prices on efforts to contain inflation. James Marple, Associate Vice President and Senior Economist with TD Bank Group, discusses the impact of the oil shock and whether rates may have to stay on hold longer than previously expected.

Transcript

Anthony Okolie: As widely expected, the US Federal Reserve kept its benchmark interest rate unchanged. Joining me now to discuss the latest decision is TD Senior Economist James Marple.

And James, what stood out to you today?

James Marple: Well, no change in the decision itself. They talked about, obviously, the Strait of Hormuz and the oil price shock, and how much uncertainty that’s created for the outlook. That was certainly front and center. But not really any changes to the statement. They kept the characterization of interest rates exactly as it was, and even their forward guidance.

The, perhaps, most interesting thing was that there were four total dissents in the statement. And that’s the most there have been since 1992. One was the obvious one, Stephen Miran, who dissented, wanted a 1/4 rate cut. But then there were three dissents from regional Fed governors that wanted a little bit of forward language that suggests, perhaps, an easing bias. And that’s the way it was characterized in terms of their dissent. They wanted that removed from the statement. So, more hawkish in tone there just on the dissents more than anything in the statement itself.

Anthony Okolie: OK. With that backdrop, we still have the US-Iran conflict. It’s still unresolved. Energy prices are still elevated. How worried should the US be about stagflation risk?

James Marple: Well, I’m not sure I’d call it stagflation, per se. When people hear stagflation, they really think of the 1970s and