The US Federal Reserve is preparing to announce a decision on interest rates, expected on Wednesday, as it weighs whether to hold rates steady or raise them further to tackle persistently elevated inflation. The decision matters because it will signal the direction of monetary policy under new Fed Chair Kevin Warsh, who took over the role two months ago, and comes after the central bank cut rates three times last year before indicating in June that its next move would likely be upward.

Annual inflation hit 4.2% in May 2026, its highest level in more than three years, driven partly by a wartime-related spike in petrol prices, though price growth eased somewhat in June, giving policymakers some breathing room. Unemployment remains low and largely unchanged over the past year, with job creation keeping pace with workforce growth. Massive tech-sector investment in artificial intelligence is helping to drive growth but is also pushing up prices for building materials, electricity and computer chips; Warsh said the committee has "no tolerance for persistently elevated inflation" and remains committed to restoring price stability, while acknowledging AI could prove "disruptive" for workers in the short term.