Federal Reserve Chair Kevin Warsh [Reuters]
Federal Reserve Chair Kevin Warsh [Reuters]

The Federal Reserve held its benchmark interest rate steady again Wednesday, though three members of the Federal Open Market Committee dissented in favor of a rate hike, exposing internal divisions over monetary policy.

The Fed announced Wednesday, after concluding its two-day FOMC meeting, that it would keep the benchmark interest rate at 3.50-3.75 percent.

The hold marks the fifth consecutive meeting at which the Fed has left rates unchanged, following pauses in January, March, April and June. It is also the second consecutive hold since Chair Kevin Warsh took office.

The decision passed by a 9-3 vote among the 12 FOMC members, a contrast to the unanimous decision to hold rates at the June meeting.

The Fed disclosed that board members Beth Hammack, Neel Kashkari and Lorie Logan each voted against the decision, calling for a 0.25 percentage point rate increase. Their dissent reflects concern over rising inflation risks as renewed armed conflict between the United States and Iran has pushed up international oil prices.

The statement explaining the Fed's decision to hold rates was nearly identical to the one issued after last month's meeting, differing only in the vote count, the identities of the dissenters and the reasons for their opposition.

"Economic activity has continued to expand at a solid pace, even as uncertainty has increased due to the Middle East conflict and other factors," the Fed said in its statement.

"Productivity gains and capital investment remain strong. Job gains are keeping pace with the labor force, and the unemployment rate has changed little," it added.

On inflation, the Fed said it "remains elevated relative to the FOMC's 2 percent goal, reflecting in part supply shocks that have driven up prices in certain sectors, including energy," and pledged that "the Committee will achieve price stability."

With the Fed holding rates, the gap between South Korean and US interest rates remained at 1 percentage point on an upper-bound basis, with South Korea's benchmark rate at 2.75 percent.

The Bank of Korea's Monetary Policy Board raised the benchmark interest rate by 0.25 percentage point, from 2.50 percent to 2.75 percent, on July 16.


mokiya@heraldcorp.com