As widely anticipated, the US Federal Reserve maintained its benchmark interest rate range 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 in its policy statement that it will thoroughly assess incoming data, the evolving outlook, and the balance of risks when considering further adjustments to the target range for the federal funds rate.
There were four dissenting votes to the rate decision, with one being dovish and three being hawkish. Fed Governor Stephen Mirran advocated for a 25-basis-point rate cut, while Beth Hammack, Neel Kashkari, and Lorie Logan preferred to maintain the current rates while removing any easing bias. Bitcoin prices remained under pressure, falling 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 to be the last presided over by Jerome Powell, whose term as chairman ends on May 15.
His replacement, Kevin Warsh, cleared a Senate Banking Committee vote earlier on Wednesday, putting him on track to take over as Powell steps down. 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, 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 contribute to increased headline inflation numbers but can also slow economic activity, placing the US central bank in a difficult position: which of its mandates – prices or economic growth – should it prioritize?