In line with market expectations, the US Federal Reserve decided to keep its benchmark interest rate unchanged at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without any adjustments, as policymakers continue to navigate the challenges of persistent inflation and 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 future adjustments to the target range for the federal funds rate. The decision saw four dissents, with one member advocating for a rate cut and three pushing for a more hawkish stance.
Fed Governor Stephen Mirran proposed a 25-basis-point rate reduction, while Beth Hammack, Neel Kashkari, and Lorie Logan preferred to maintain the current rate while removing any easing bias. The news put pressure on bitcoin, which remained around 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 rose, 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 central bank meeting is likely the last to be presided over by Jerome Powell, whose term as chairman ends on May 15, and his replacement, Kevin Warsh, is set to take over after passing a Senate Banking Committee vote earlier on Wednesday.
The three hawkish dissents indicate 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. Oil prices have rebounded to near their post-war highs, with WTI crude trading just shy of $105 per barrel, after pulling back earlier this month amid hopes for a lasting peace between the US and Iran.
The increase in energy costs will likely contribute to higher headline inflation numbers but may 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.