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 change, as officials carefully weigh the risks of persistent inflation against signs of a slowing economy. The Fed stated that it will 'carefully assess incoming data, the evolving outlook, and the balance of risks' when considering future adjustments to the federal funds rate target range. The decision was met with four dissents, including one dovish and three hawkish votes, with some officials advocating for a rate cut and others pushing for the removal of any easing bias.
The news put pressure on bitcoin, which remained about 0.5% lower over the past 24 hours, while US stocks experienced modest declines and yields rose, with the two-year Treasury increasing by 9 basis points to 3.93% and the 10-year Treasury rising by 5 basis points to 4.40%. This 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 hawkish dissents suggest that Warsh may face challenges in implementing rate cuts, even if that is his desired direction. Market attention will now turn to Powell's post-meeting press conference for clues on the future path of monetary policy.
Oil prices have rebounded to near their post-war highs, with WTI crude trading just below $105 per barrel, which can feed through to headline inflation numbers but may also slow economic activity, putting the US central bank in a difficult position.