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Fed holds interest rates steady despite inflation concerns · THE DAILY BRIEF

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  Speaker 1: Hi. I'm Lindsay Riser of the Federal Reserve is about
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  Speaker 1: to announce its decision on interest rates. Even with persistent
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  Speaker 1: concerns about oil prices and inflation, no change is expected today,
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  Speaker 1: according to experts. Now, the Fed maintains its two percent
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  Speaker 1: target goal for inflation levels. CBS twenty four to seven
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  Speaker 1: Morning's co host and MoneyWatch correspondent Kelly O'Grady is at
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  Speaker 1: the New York Stock Exchange. Kelly, we officially know now
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  Speaker 1: there is no change again widely expected. Take us behind
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  Speaker 1: this decision.
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  Speaker 2: Yeah, so I'm reading it right now. This wasn't unanimous.
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  Speaker 2: This was actually a nine to three split. Remember, the
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  Speaker 2: Federal Reserve has twelve voting members, So what that means
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  Speaker 2: is nine of those members voted to keep interest rates
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  Speaker 2: steady and three dissented likely said they actually would have
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  Speaker 2: preferred to hike rates by a quarter percentage point. Now,
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  Speaker 2: this was relatively expected. Before going into this, the markets
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  Speaker 2: were pricing in a sixty four percent chance that we
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  Speaker 2: were going to hold inter straight steady, but a one
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  Speaker 2: in three chance that we were actually going to high grades.
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  Speaker 2: Because we do know that members of the Federal Reserve
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  Speaker 2: would prefer some of them to actually see what we
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  Speaker 2: call a hawk ish What that means is for the
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  Speaker 2: FED to be more aggressive when tackling inflation. And in
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  Speaker 2: this case they think that the clear answer those three
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  Speaker 2: folks would be to high grades. Now I'm looking at
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  Speaker 2: the statement right now. It says economic activity is expanding
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  Speaker 2: at a solid pace despite elevated uncertainty or remember Lindsay
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  Speaker 2: that word uncertainty always seems to come back with the economy.
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  Speaker 2: It says job gains have kept pace with the workforce,
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  Speaker 2: the unemployment rate has changed little inflation. Okay, this is
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  Speaker 2: really where they called it out. They called out energy prices,
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  Speaker 2: this being the committee's focus, and so what was driving this.
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  Speaker 2: Basically the FED is saying, okay, most of at least
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  Speaker 2: the folks on a FED job market is okay, we
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  Speaker 2: really need to fo on inflation. It does not warrant
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  Speaker 2: an interest right cut. But things are not so bad
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  Speaker 2: that we need to hyke rates right now.
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  Speaker 1: How common is descent among the board?
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  Speaker 2: It's becoming more common. A few months ago I would
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  Speaker 2: have said to you, wow, you never see more than
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  Speaker 2: one person descent, And over the last handful of meetings
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  Speaker 2: or so, it's really been you know, one to two dissenting.
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  Speaker 2: Last time was a unanimous decision, but this is becoming
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  Speaker 2: more and more common now. Federal Reserve Chair Kevin Worsch,
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  Speaker 2: this is the second meeting. At the last press conference,
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  Speaker 2: he called it a family fight that the Federal Reserve
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  Speaker 2: is going through, that there's healthy discussion. I think what's
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  Speaker 2: going to be really interesting in this press conference at
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  Speaker 2: two thirty if we hear him indicate that maybe that
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  Speaker 2: family fight has become more of a family blow up
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  Speaker 2: now that we have three descents, that sort of shifts
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  Speaker 2: a little bit more. Now we're thinking about September. If
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  Speaker 2: you continue to see these energy prices rise with all
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  Speaker 2: of the instability in the Middle East, there are some
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  Speaker 2: folks that I'm talking to that say that an interest
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  Speaker 2: rate hike would be warranted come September. So I'm really
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  Speaker 2: curious to see what that discussion was like. Worsh may
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  Speaker 2: not really pull back the curtain, if you will, but
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  Speaker 2: I can tell you for sure he's going to be
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  Speaker 2: asked by reporters in the room.
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  Speaker 1: Yeah, and we know that this goes against what the
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  Speaker 1: president wants. The President and his administration they want to
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  Speaker 1: see lower rates, and so how does that play into
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  Speaker 1: the economy. Obviously they're supposed to be operating separately. And also,
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  Speaker 1: are we really expecting to get a lot of answers
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  Speaker 1: from Worsh because last time he said he wasn't going
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  Speaker 1: to be reading any tea leaves for anybody anymore.
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  Speaker 2: That's right. He was pretty much like, we shouldn't be
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  Speaker 2: talking about interest rates in the future, We shouldn't share
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  Speaker 2: predictions because things change so quickly. And actually, to be fair,
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  Speaker 2: a lot of investors and economists were in agreement with
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  Speaker 2: him because it can move the market so much in
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  Speaker 2: terms of how the president might react. And this question
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  Speaker 2: of Fed intoans you want the FED to continue operating
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  Speaker 2: independently versus having political pressure because any person in power
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  Speaker 2: would want to lower interest rates, right, that's what's popular
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  Speaker 2: with folks consumers in the economy because we all want
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  Speaker 2: it to be cheaper to borrow money, especially those of
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  Speaker 2: us who are trying to buy a home over here.
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  Speaker 2: That being said, I think the fact that you don't
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  Speaker 2: see Kevin Worsh voting to lower interest rates, he clearly
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  Speaker 2: was one of the folks that voted to keep interest
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  Speaker 2: rates steady. I would take a gander that independence is
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  Speaker 2: not really in question. Again, we don't know what the
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  Speaker 2: discussions were behind the closed doors. We'll get the minutes
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  Speaker 2: the readout of what that discussion is in a few
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  Speaker 2: weeks from now, but I can imagine that the President
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  Speaker 2: is not happy to see the decision today.
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  Speaker 1: Well, and you mentioned why the president and why some
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  Speaker 1: consumers might want to see those rates lower. But also
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  Speaker 1: take us through the importance of the rate in its
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  Speaker 1: relationship with inflation, which has been persistently sticky.
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  Speaker 2: Right, Okay, So rates this is the tool that the
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  Speaker 2: Federal Reserve can utilize to either one incentivize the economy
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  Speaker 2: to grow or job growth, because if you think about it,
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  Speaker 2: if it becomes cheaper to borrow money, if that interest
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  Speaker 2: rate lowers, then businesses they'll go out. Maybe they'll invest
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  Speaker 2: in that new restaurant, invest in that new location. It
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  Speaker 2: creates jobs, It creates then more money flowing into the
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  Speaker 2: economy and more spending. On the flip side, when you
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  Speaker 2: raise rates, that's when you are trying to tackle inflation.
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  Speaker 2: You want to make it more expensive to borrow money.
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  Speaker 2: And therefore the rest of us are looking at our
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  Speaker 2: credit card bills going Okay, maybe I'm not going to
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  Speaker 2: go out and buy as much, and then when there
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  Speaker 2: is less demand in the economy, that's when prices tend
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  Speaker 2: to come down. And so this is the tension that
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  Speaker 2: the Fed is dealing with. And it's not just that
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  Speaker 2: the President would want lower rate. It's consumers, it's a
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  Speaker 2: lot of businesses, it's the market. Frankly, remember all that
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  Speaker 2: AI spending that we're talking about. A lot of these
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  Speaker 2: companies are borrowing money to go and spend and invest
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  Speaker 2: in data centers and whatnot, and that is better for
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  Speaker 2: the market when it's a cheaper rate that they're borrowing
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  Speaker 2: that money at. And then finally, national debt. We haven't
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  Speaker 2: been talking about that for a while, but that is
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  Speaker 2: continuing to rack up in the background. When you have
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  Speaker 2: a lower interest rate, you are paying less money to
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  Speaker 2: service that debt, to pay that interest than you would otherwise.
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  Speaker 2: So that's another reason why the President has been advocating
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  Speaker 2: for lower rates.
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  Speaker 1: You mentioned the markets.
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  Speaker 2: Why the sell off today a couple things. I think
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  Speaker 2: there was like a little bit of trepidation going into
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  Speaker 2: this Federal Reserve meeting that they were going to hike
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  Speaker 2: interest rates. Like I said, it was a one in
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  Speaker 2: three chance, roughly, it's not zero. It's never zero, but
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  Speaker 2: that's higher than it's been in a long time. The
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  Speaker 2: other thing is oil prices. We have seen oil hover
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  Speaker 2: above seven percent increase today for most of the day
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  Speaker 2: because the President has indicated he is going to hit
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  Speaker 2: Iran hard again. And what happens then oil prices go up.
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  Speaker 2: That trickles through to inflation, and then what happen is
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  Speaker 2: at the next FED meeting, lindsay, the talk of an
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  Speaker 2: interest rate height becomes louder and louder.
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  Speaker 1: Kelly, you're simply the best. We'll see you back next hour.
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  Speaker 2: Thank you.