In line with market expectations, the US Federal Reserve opted to keep its benchmark interest rate range unchanged at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without any adjustments, as officials carefully weigh the risks of persistent inflation against indications of slowing economic growth. The Fed stated in its policy statement, 'In assessing the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully evaluate incoming data, the evolving outlook, and the balance of risks.' The decision was met with four dissents, with one member advocating for a decrease in rates and three pushing for a more hawkish stance.
Fed Governor Stephen Mirran proposed reducing rates by 25 basis points, while Beth Hammack, Neel Kashkari, and Lorie Logan favored maintaining current rates while eliminating any easing bias. The news put pressure on bitcoin, which remained approximately 0.5% lower over the past 24 hours, trading just below $76,000. US stocks experienced modest declines, with the Nasdaq down 0.35%, and yields surged, with the two-year Treasury up 9 basis points to 3.93% and the 10-year up 5 basis points to 4.40%.
Today's meeting is likely to be Jerome Powell's last as chairman, as his term concludes on May 15, and his replacement, Kevin Warsh, having passed the Senate Banking Committee vote, is poised to take over. The three hawkish dissents suggest that Warsh will 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, as traders seek clues on the future trajectory of monetary policy. After a sharp decline earlier in the 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 shy of $105 per barrel.
Higher energy costs contribute to increased headline inflation but can also slow economic activity, placing the US central bank in a difficult position: which of its mandates – price stability or economic growth – should it prioritize?