Seoul: The U.S. Federal Reserve chose to maintain its benchmark interest rate in a 9-3 decision, reflecting ongoing concerns about the economic repercussions of renewed conflict in Iran and President Donald Trump's persistent calls to decrease borrowing costs. The decision emerged from a two-day meeting of the Federal Open Market Committee (FOMC), opting to keep the rate in the 3.5-3.75 percent range, marking the fifth consecutive pause.

According to Yonhap News Agency, this decision maintains a gap of up to 1 percentage point between the interest rates of South Korea and the United States. During a press conference, Fed Chair Kevin Warsh emphasized the central bank's commitment to its 2 percent inflation target for ensuring price stability. He highlighted the "impressive resilience" of the U.S. economy despite facing "recent shocks."

Warsh addressed misconceptions about the Fed's inflation target, stressing that the goal remains firmly at 2 percent. He stated, "Let me reiterate (that) there is no soft inflation target. There is no soft implicit target. Not on this committee's watch. There is only a target, and it's 2 percent."

In response to inquiries about potential rate increases, Warsh acknowledged that adjustments might be necessary if inflation remains high but noted that such measures should not be viewed "in isolation." He outlined the Fed's assessment of the economy, noting that inflation is still "elevated" compared to the 2 percent target, but the economy's output, capital expenditure (CAPEX), and productivity remain strong, alongside a stable labor market.

The FOMC's internal discussions revealed differing opinions, with three participants, Beth Hammack, Neel Kashkari, and Lorie Logan, favoring a quarter percentage point rate increase. Warsh described these discussions as "a real family fight," emphasizing the importance of diverse perspectives in achieving sound policy decisions.

The rate decision followed renewed pressure from President Trump, who, earlier in the week, advocated for the U.S. to have "the lowest interest rate in the world." Despite his wish for lower rates, Trump expressed admiration for Warsh, describing him as "fantastic," "brilliant," and "smart." However, he attributed the decision to maintain rates to the influence of the Fed's "political board."