As widely anticipated by the market, the US Federal Reserve maintained its benchmark federal funds rate range at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting with no changes, as officials carefully weigh the risks of persistent inflation against 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 further adjustments to the target range for the federal funds rate. The rate decision saw four dissents, with one being dovish and three hawkish.
While Fed Governor Stephen Mirran preferred a 25 basis point rate cut, Beth Hammack, Neel Kashkari, and Lorie Logan favored maintaining the current rate while removing any easing bias. Ahead of the news, bitcoin prices remained around 0.5% lower over the past 24 hours, trading just below $76,000, while US stocks experienced modest declines, with the Nasdaq down 0.35%. Yields surged higher, 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 will be replaced by Kevin Warsh, who passed 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 path of monetary policy. After a sharp decline earlier this month due to hopes of 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 numbers but may also slow economic activity, putting the US central bank in a difficult position, where it must prioritize between its mandates of prices and economic growth.