Fed holds rates steady again as inflation and job losses collide

The Federal Reserve has kept its benchmark interest rate unchanged at both meetings since Kevin Warsh became chairman in March, with the rate holding in the 3.50% to 3.75% range since late last year. At its most recent meeting, the Fed saw its largest internal dissent in a decade, with nine policymakers voting to hold rates steady and three voting to raise them.

Inflation cooled slightly from June to July but remained at 3.5% year over year, above the Fed's 2% target, based on the latest Consumer Price Index data. At the same time, the U.S. unexpectedly lost 23,000 jobs in July, far below forecasts calling for gains of 80,000 to 85,000. The unemployment rate fell to 4.1% from 4.2% in June, but largely because 264,000 people left the workforce rather than because hiring improved.

The mixed signals leave the Fed weighing whether to keep fighting above-target inflation or ease policy to support a weakening job market. Warsh has said he intends to keep the Fed's communications more circumspect than past chairs, offering little forward guidance on the central bank's next move. The Fed's next meeting is in September, with current signs pointing toward another rate hold.

Read the full story at The Globe and Mail.