US Federal Reserve holds interest rate at 3.5-3.75% as supply shock maintains inflation above target range

As per the FOMC’s June policy outcome, the committee kept the interest rates on hold on the backdrop of the West Asia crisis supply shock maintaining inflation above the target range and gaining growth in the US labour market.

The US Federal Reserve has a dual mandate to control inflation in the economy, while boosting job growth in the labour market.

“The Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4%, in support of the Federal Reserve's dual mandate. The Committee reaffirmed its policy of maintaining ample reserves in the banking system,” said the FOMC in its official statement.

This time, in the US Fed’s June 2026 policy meeting, the 12 members voted unanimously towards keeping the interest rates unchanged at current levels on Wednesday, for the first time since an earlier FOMC meeting back in 2024.

Inflation concerns amid job growth

Although the Federal Reserve said that the economic activity in the United States is growing at a solid pace despite the West Asia conflict uncertainties, the inflation remains elevated above the 2% target level due to the supply shocks that have driven price increases in certain sectors, including energy.

US Bureau of Labour Statistics data showed that US CPI inflation remained at an elevated level, rising to 4.2% in the 12 months ending May 2026, from its earlier 3.8% levels in April 2026.

“The committee will deliver price stability,” said the FOMC in its statement.

While the job market witnessed growth to the tune of total nonfarm payroll employment increasing by 172,000 in May 2026, marking gains in sectors like leisure and hospitality, local government, and health care, the unemployment rate was unchanged at 4.3%.

“Job gains have kept pace with the workforce, and the unemployment rate has changed little,” the FOMC said.

US stocks today

After the US Fed’s monetary policy action to hold rates, the benchmark US stock market indices dropped during the intraday trading session on Wednesday, June 17, 2026.

However, after the initial drop, benchmark indices like the Dow Jones, S&P 500, and the Nasdaq Composite were trading lower in the afternoon market session in the United States, according to MarketWatch data.

The Dow Jones Industrial Average closed 0.98% lower at 51,492.55 points after he trading session on Wednesday, compared to 51,999.67 points at the previous US stock market session.

The S&P 500 ended 1.21% lower at 7,420.10 points after Wednesday’s market, compared to 7,511.35 points at the previous market session, as per the exchange data.

While the tech-heavy Nasdaq Composite lost 1.34% closing lower at 26,021.66 points on June 17, compared to 26,376 points at the previous market close. The impact of the interest rate hold move will be felt across the equity markets in Asia on Thursday, June 18.