A divided US Federal Reserve kept interest rates unchanged for a third straight meeting on Wednesday on high uncertainty from the Middle East war, in what was likely its last gathering helmed by Jerome Powell.

"Inflation is elevated, in part reflecting the recent increase in global energy prices," the central bank said.

Its decision keeps rates at a range between 3.50 percent and 3.75 percent.

But four out of 12 voting officials opposed the decision, including Stephen Miran, who sought a quarter-point cut.

Three others – Beth Hammack, Neel Kashkari and Lorie Logan – backed the pause but not the Fed statement signalling an inclination towards lower interest rates.

This was the most number of dissenting votes since 1992, and the divergence among officials will be closely watched.

The Fed has been on a path of rate cuts since late last year.

But with the US-Israel war on Iran causing a surge in energy costs and snarling supply chains, analysts are monitoring if inflation could prompt policymakers to instead consider the need for a rate hike.

Powell, who has been a frequent target of US President Donald Trump, is set to hold a press conference after the Fed's decision.

Besides his assessment of economic fallout from the war, all eyes will be on his future plans.

Powell's tenure as Fed chairman ends May 15, and a Senate panel has voted to advance the nomination of Trump's choice for new Fed chairman, Kevin Warsh.

But Powell could choose to stay on as a Fed governor, even after his chairman term ends. (AFP)



Edited by Robert Kemp