In line with market expectations, the US Federal Reserve kept its benchmark interest rate unchanged at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without a change, as officials balance persistent inflation concerns with signs of decelerating economic growth. The Fed stated that it will carefully evaluate incoming data, the evolving economic outlook, and the balance of risks when considering further adjustments to the federal funds rate target range. The rate decision saw four dissenting votes, with one member advocating for a rate cut and three pushing for a more hawkish stance.
Fed Governor Stephen Mirran favored a 25 basis point rate reduction, while Beth Hammack, Neel Kashkari, and Lorie Logan preferred to maintain rates while removing any easing bias. Bitcoin prices remained under pressure, declining by approximately 0.5% over the past 24 hours to trade just below $76,000.
US stocks experienced modest declines, with the Nasdaq down 0.35%. 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%.
Today's central bank meeting is likely the last to be presided over by Jerome Powell, whose term as chairman ends on May 15. His successor, Kevin Warsh, cleared a Senate Banking Committee vote earlier on Wednesday, paving the way for him to take over as Powell steps down. The three hawkish dissents suggest that Warsh may face challenges in implementing rate cuts, even if that is his desired course of action. Market attention will now shift to Powell's post-meeting press conference, where traders will seek clues on the future direction of monetary policy.
After 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 shy of $105 per barrel. Higher energy costs can contribute to increased headline inflation, but they can also slow economic activity, putting the US central bank in a difficult position: which of its mandates – price stability or economic growth – should it prioritize?