US interest rates held for fifth time in a row

US interest rates have been held for the fifth time in a row by the Federal Reserve. The decision, which was broadly expected, means rates remain between 3.5% and 3.75%. Higher interest rates make borrowing more expensive for people wanting to secure loans, mortgages and credit cards, but can lead to better returns on savings.Policymakers decided to keep rates at the level they have been since December last year after inflation, the rate at which prices rise, slowed last month, but concerns remain that the dip could prove short-lived.Despite inflation falling to 3.5% in the year to June, the rate prices are rising at remains above the Fed's 2% target, as it has been for more than five years. The lower rate of inflation last month does not mean prices are falling, but that they are rising at a slower rate.There is also growing uncertainty over the impact of the ongoing conflict in the Middle East on global oil prices and subsequently general consumer prices in the coming months. On Wednesday, Brent crude, the global benchmark for oil prices rose by more than 6% to above $89 a barrel.The Fed acknowledged that inflation remained "elevated" which it said was in part due to energy price increases, but said US economic activity was expanding at a "solid pace" despite uncertainty caused by the conflict in the Middle East".But policymakers at the US central bank voted 9-3 in favour of keeping interest rates on hold. The three who voted against were pushing instead for a small hike, with speculation ahead of the decision that an increase in the rate was on the cards due to renewed hostilities between the US and Iran pushing up global oil and food prices.Asked why the Fed did not rates, Warsh said that, while there was "impatience" being felt by households and businesses over high prices, his board had only been in position for eight-and-a-half weeks."We are on the job, we will deliver, we are focused like a laser on making sure we can do it, but the suggestion we are going to be able to wave with our magic wand is one I want to disabuse you and everyone else of," he told a press conference.Warsh said he had wanted to and succeeded in having a "family fight" with his fellow policymakers on the rates decision. "I asked for a good family fight, and I got one. That's the purpose. That's the design feature," adding that "there was a large majority support for the decision that we made in the room".Richard Flynn, managing director at Charles Schwab UK, said the "biggest smoke signal" for the US central bank was the energy market, with the ongoing conflict in Iran likely to influence future rate decisions."We expect the Fed to hold through year end even as futures markets flirt with pricing in a hike," he said.Warsh, who was appointed by US President Donald Trump in May, has held interest rates twice since he took over as chairman.He previously told Congress that the central bank had "no tolerance to persistently elevated inflation" and that he was committed to "restoring price stability".President Trump pushed Warsh's predecessor, Jerome Powell, to cut interest rates, and has made it clear he expects Warsh to fulfil his demand for reductions in borrowing costs for Americans.But the new Fed chairman has said his "goal" is "for there to be no politics" and has stressed the importance of the Fed's independence.Richard Carter, head of fixed interest research at investment management firm Quilter Cheviot, said Trump would be watching the Fed's decision with interest, particularly with the US mid-term elections less than 100 days away,"The president will want to deliver positive news on the economy," he added. "Inflation continuing to remain elevated and the looming potential for rate hikes certainly makes that narrative difficult to achieve."Increasing interest rates is a way of tackling inflation by making borrowing more expensive, encouraging people to cut back on spending and in turn leading to lower demand and price rises easing. But it is a balancing act, as high interest rates can lead businesses to hold off on investment, harming the economy. Meanwhile, lower interest rates can boost the economy by reducing borrowing costs and encouraging spending and investment.