Friday, July 31 2026
Friday, July 31 2026
MONETABRIEF – The Federal Reserve kept rates unchanged claiming that a spike in inflation was a supply shock from the US Iran war that did not warrant monetary policy tightening, in contrast to many other central banks.
"Inflation remains elevated relative to the Committee's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy," the Fed said in a statement.
"The Committee will deliver price stability."
However US inflation was 3.5 percent in the 12-months to June, though there was a drop of 0.4 percent in the month.
All items less food and energy (core inflation) stripping out food and energy which harms the poorest most, was also at 2.6 percent in June.
Fed Governors Beth M Hammack, Neel Kashkari, and Lorie K Logan, voted against the decision seeking a 25 basis point hike.
Fed previously avoided rate hikes in 2022 blaming 'supply chain bottlenecks' (cost push). The IMF also blamed Putin, however the Fed eventually had to raise rates.
The US has seen consumer asset prices advancing making some people rich, while rising food and energy prices are impoverishing the less affluent.
The Fed said it will also maintain its ample reserves regime or excess liquidity.
Excess liquidity however can accommodate any 'supply shock' and prevent other prices falling when people have less money to spend on other goods while boosting asset prices for the affluent.
"Sharp rises in the prices of energy and food have squeezed spending on other goods and services, putting downward pressure on those prices," one time Bank of England Governor Mervyn King said after hiking rates.
"That is why measures of ‘core inflation’ that strip out certain prices can be highly misleading."
(Colombo/July29/2026)
| US Dollar | 340.98 | Sell - |
| Euro | 391.44 | Sell - |
| Japan Yen | 2.114 | Sell - |
| Sterling | 458.31 | Sell - |
| AED | 91.58 | Indi - |
| 3 month bill | 9.95 | 0.18 ▼ |
| 12-m bill | 10.20% | 0 - |
| Gold | $4035 | - - |
| ASPI | 21,229.14 | 41.9 ▲ |
Comments
Be the first person to comment and join the debate