In line with market expectations, the US Federal Reserve kept its federal funds rate range unchanged at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without a rate adjustment as officials balance persistent inflation concerns against signs of slowing economic growth. The Fed stated that it will carefully assess incoming data, the evolving outlook, and the balance of risks when considering further adjustments to the target range for the federal funds rate. The decision was met with four dissents, including one dovish and three hawkish votes.
Meanwhile, Fed Governor Stephen Mirran advocated for a 25 basis point rate cut, while Beth Hammack, Neel Kashkari, and Lorie Logan preferred to maintain rates while removing any easing bias. Ahead of the announcement, bitcoin prices remained under pressure, trading approximately 0.5% lower over the past 24 hours, while US stocks experienced modest declines.
Yields surged, with the two-year Treasury rising 9 basis points to 3.93% and the 10-year Treasury increasing 5 basis points to 4.40%. This central bank meeting is likely to be the last presided over by Jerome Powell, whose term as chairman ends on May 15, and will be succeeded by Kevin Warsh, who cleared a Senate Banking Committee vote earlier on Wednesday. The three hawkish dissents suggest that Warsh may face challenges in implementing rate cuts, even if that is his desired direction. Market attention will now shift to Powell's post-meeting press conference, where traders will seek clues on the future trajectory of monetary policy.
Following a sharp decline earlier this month amid hopes for a lasting peace between the US and Iran, oil prices have rebounded to near their post-war highs, with WTI crude trading just below $105 per barrel. Higher energy costs contribute to increased headline inflation but can also slow economic activity, putting the US central bank in a difficult position as it weighs its dual mandates of price stability and economic growth.