The Federal Reserve held interest rates steady on Wednesday as the economy weathers its highest inflation in three years.

The announcement marked the first decision on interest rates rates since Trump nominee Kevin Warsh took the helm as Fed chair.

Speaking at a press conference, Warsh voiced a commitment to bring inflation down to the Fed’s desired level of 2%. The annual pace of price increases currently registers at more than twice that target rate.

“Persistently high prices are a burden for the American people,” Warsh told reporters in Washington, D.C. “This committee will deliver price stability.”

All 12 members of the FOMC voted to hold interest rates steady, meaning Warsh and his predecessor, former Fed Chair Jerome Powell, agreed on the rate decision.

Nine members indicated they expect to raise interest rates by the end of the year, marking a significant change in sentiment from a previous projection issued three months earlier.

The Federal Open Market Committee (FOMC), a 12-member policymaking body at the Fed, issued a statement describing inflation as “elevated.”

The current level of inflation in part reflects “supply shocks that have driven price increases in certain sectors, including energy,” the FOMC said.

The policy move also arrived at a moment of flux for the nation’s economy, just days after an agreement between the United States and Iran offered hope for some price relief.

The U.S.-Iran accord, set to be formally signed on Friday, came as gasoline prices fell below $4 a gallon for the first time since March. Still, fuel costs stand well above pre-war levels, and an array of grocery prices remain elevated.

In recent weeks, odds have risen for a potential interest rate hike by the end of 2026, according to the CME FedWatch Tool, which grants a roughly four in 10 chance of a quarter-point increase in December.

The shift in expectations came after a stronger-than-expected jobs report earlier this month showed robust hiring in May. In theory, a resilient labor market could afford central bankers leeway to raise interest rates in an effort to dial back inflation, since elevated borrowing costs risk a hiring slowdown.

Inflation jumped for a third consecutive month as the Iran war continued to drive up prices in May, surpassing 4% for the first time in three years

The Middle East conflict prompted the Iranian closure of the Strait of Hormuz, a maritime trading route that facilitates the transport of about one-fifth of global oil supply. The standoff triggered one of the largest oil shocks ever recorded, sending gasoline prices surging.

On Monday, President Donald Trump announced a U.S.-Iran deal that included plans to reopen the strait. Iranian Deputy Foreign Minister Kazem Gharibabadi confirmed the deal had been finalized and said it would be signed in Switzerland on Friday. Oil prices fell to their lowest level since March.

The benchmark rate stands at a level between 3.5% and 3.75%. That figure marks a significant drop from a recent peak attained in 2023, but borrowing costs remain well above a 0% rate established at the outset of the COVID-19 pandemic.

The rate decision is the first major policy move overseen by Warsh. During his term as a Fed governor in the late 2000s and early 2010s, Warsh gained a reputation as an interest-rate “hawk,” meaning he generally preferred higher interest rates as a means of ensuring low and stable inflation.

Last year, Warsh voiced support for lower interest rates. At his Senate confirmation hearing in April, Warsh emphasized the threat posed by elevated inflation.

“When inflation surges — as it has done in recent years — grievous harm is done to our citizens, especially to the least well-off,” Warsh said.

Bucking typical norms, Powell casted a vote on interest rates as a member of the Fed’s policymaking board.

Powell said he would stay on at the central bank’s board of governors after his term as chair expired as an investigation into the Fed’s office renovation continues.

The Department of Justice moved to drop a criminal probe into Powell in April, calling on the Fed’s inspector general to carry out the investigation into cost overruns tied to the renovation. Powell will remain on the Fed’s board for an indeterminate length of time, he said last month.

The criminal investigation into Powell focused on alleged false testimony to Congress about an office renovation. Powell, who was appointed by Trump in 2017, has rebuked the probe as a politically motivated effort to influence interest-rate policy. Trump denied any involvement in the criminal investigation.