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 rate adjustment, as policymakers balance persistent inflation risks against signs of slowing economic growth. The Fed stated that it will carefully evaluate incoming data, the evolving outlook, and the balance of risks when considering further adjustments to the target range for the federal funds rate.
Four members dissented from the rate decision, with one advocating for a rate cut and three pushing for a more hawkish stance. Fed Governor Stephen Mirran preferred a 25 basis point rate reduction, while Beth Hammack, Neel Kashkari, and Lorie Logan wanted to maintain current rates while removing any easing bias. Bitcoin prices remained under pressure, trading about 0.5% lower over the past 24 hours, while US stocks experienced modest declines, with the Nasdaq down 0.35%.
Yields rose, with the two-year Treasury increasing 9 basis points to 3.93% and the 10-year rising 5 basis points to 4.40%. This central bank meeting is likely to be the last under the leadership of Jerome Powell, whose term as chairman ends on May 15. His successor, 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 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 path of monetary policy.
After a sharp decline earlier this month, oil prices have rebounded to near their post-war highs, with WTI crude trading just below $105 per barrel. Higher energy costs can contribute to inflation, but they can also slow economic activity, putting the US central bank in a difficult position: which of its mandates - prices or economic growth - should it prioritize?