The US Federal Reserve has kept its benchmark interest rate unchanged in the range of 3.5% to 3.75%, as policymakers signaled continued caution amid elevated inflation and global economic uncertainty.

The decision was announced following a two-day meeting of the Federal Open Market Committee (FOMC), with all 12 voting members supporting the move to maintain the current policy stance.

In its statement, the FOMC said economic activity in the United States is “expanding at a solid pace,” despite heightened uncertainty partly linked to geopolitical tensions in the Middle East.

The committee stated that productivity growth and capital investment remain strong, while labour market conditions have stayed broadly stable, with job gains keeping pace with workforce expansion and unemployment showing little change.

However, officials reiterated that inflation remains above the Fed’s 2% target, driven in part by supply-side shocks affecting sectors such as energy.

Read More: US economy braces for slow, uneven growth in 2026

Alongside the policy decision, Fed officials released updated economic projections for 2026–2028. The median forecast now expects: GDP growth: 2.2% in 2026 (down from 2.4% in March); unemployment rate: 4.3% in 2026 (down from 4.4%) ; inflation: 3.6% in 2026, rising sharply from the earlier projection of 2.7%

Inflation is projected to ease to 2.3% in 2027, still slightly above the previous estimate, underscoring expectations that price pressures will remain sticky over the medium term.

New Federal Reserve Chair Kevin Warsh, presiding over his first policy meeting, did not submit personal projections but reinforced the central bank’s focus on inflation control.

He said financial markets “perform best when they react to incoming data,” and reaffirmed that the Fed’s 2% inflation target remains unchanged, describing it as a “long-held and non-negotiable commitment.”

Warsh added that the central bank is determined to restore inflation to target after it has remained above 2% for nearly five years, calling the commitment “strong, unanimous, and unambiguous.”

Following the announcement, US equity markets closed lower, while the dollar index strengthened and gold prices declined, reflecting expectations that interest rates may remain elevated for longer.

Analysts cited by financial outlets said the Fed continues to operate in a data-dependent mode, with inflation increasingly viewed as the dominant policy concern.

Economic forecasts from major institutions suggest diverging expectations. Goldman Sachs Research now sees no rate cuts in 2026, pushing easing further into 2027. Citi economists, however, still expect three rate cuts in 2026, beginning in September.

The divergence reflects ongoing uncertainty over whether inflation will moderate quickly enough to allow policy easing.

Warsh also announced the creation of five internal task forces aimed at reviewing key areas of Federal Reserve operations, including: Policy communications and the Summary of Economic Projections; balance sheet management; data sources used for policy decisions; labour market and productivity analysis; and inflation targeting frameworks.

The Fed’s latest decision indicates a clear message: while the US economy remains resilient, inflation continues to drive monetary policy direction. With projections pointing to higher-than-expected price pressures and a cautious policy stance from new leadership, expectations for near-term rate cuts remain highly uncertain.