In line with market expectations, the US Federal Reserve maintained its benchmark fed funds rate range at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting with no changes, as officials balance persistent inflation risks against signs of slowing economic growth. The Fed stated in its policy statement, 'In assessing the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully evaluate incoming data, the evolving outlook, and the balance of risks.' There were four dissents to the rate decision, with one being dovish and three hawkish. Fed Governor Stephen Mirran preferred a 25 basis point rate cut, while Beth Hammack, Neel Kashkari, and Lorie Logan wanted to maintain rates while removing any easing bias.
Under pressure ahead of the news, bitcoin remained around 0.5% lower over the past 24 hours, trading just below $76,000. US stocks continued with modest declines, the Nasdaq down 0.35%. 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.
His replacement, Kevin Warsh, passed a Senate Banking Committee vote earlier 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. Attention will next turn to Powell's post-meeting press conference as traders seek clues on the path forward for monetary policy. After a sharp decline earlier this month amid hopes for 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 headline inflation numbers but 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?