(3rd LD) Fed holds key interest rate steady; Warsh says inflation 'too high'

(ATTN: UPDATES with comments on South Korea at bottom)
By Chang Dong-woo

WASHINGTON, Oct. 28 (Yonhap) -- The U.S. Federal Reserve on Wednesday held its benchmark interest rate steady, following the central bank's quarter percentage point hike last month, while noting that inflation remains high and needs to be kept in check.

During the two-day Federal Open Market Committee (FOMC) meeting, the Fed decided to maintain the rate at the 3.75-4.00 percent range in a 10-2 vote. "The Committee is continuing its policy of maintaining ample reserves in the banking system," the Fed said in a statement.

Last month, the Fed raised its benchmark interest rate by a quarter percentage point in its first hike since July 2023, while signaling the possibility of another increase later this year amid persistent inflation and high oil prices.

The Fed's decision left the gap between the key interest rates of South Korea and the U.S. at up to 1 percentage point.

The decision was in line with overall market expectations.

Global bond investment manager Pacific Investment Management Co. (PIMCO) projected last week that the Fed would hold rates steady in its October meeting before delivering another quarter-point increase in December.

"Economic activity is expanding at a strong pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little," the Fed said.

Fed Chair Kevin Warsh noted, however, that inflation remained "too high."

"Energy and related prices have moved higher again in recent weeks, and our job is to ensure that relative price changes in some sectors do not broaden out across the economy," Warsh told a press briefing.

"It's our responsibility to get inflation down," Warsh said, explaining that the FOMC discussions over the past few days focused on price stability.

Warsh added that the accumulation of more information and data will help the FOMC determine the policy stance appropriate to ensure inflation returns to its 2 percent goal in a timely manner.

The Fed chief also announced a change to the schedule of FOMC meetings next year, with plans to hold rate-setting votes at seven out of eight meetings next year.

"We believe eight meetings per year is the right number for the FOMC, but in 2027, one meeting will focus exclusively on broad monetary policy strategy, with neither a vote on the federal funds rate nor a policy statement anticipated," Warsh said, while projecting that the number of rate-setting meetings would be reduced to six in 2028.

Warsh also expressed interest in the South Korean economy, citing the country's role in supplying key components for the ongoing technology boom.

"I would say I paid probably more attention to the Korean economy than you might think because when I'm looking at the feedstocks effectively for this new surge in technology, a lot of it's coming from Japan and Korea, some from Singapore," he said.

"So I'm particularly interested in what's happening in the Korean economy, usually because it's telling me what's on planes and ships coming this way," he added.

He also praised Bank of Korea (BOK) Gov. Shin Hyun-song, describing the South Korean central bank chief as a longtime friend whom he first met around the time of the global financial crisis. "I've known (Shin) for 20 years, and (he) is a very talented guy and a good friend. So I'm glad he's in that post," he said.

odissy@yna.co.kr
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