Federal Reserve Keeps Interest Rates Unchanged in Powell's Final Meeting as Chairman

In line with market expectations, the US Federal Reserve maintained its benchmark interest rate range at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without any changes, as officials carefully balance persistent inflation risks with signs of a slowing economy. The Fed stated that it will thoroughly assess incoming data, the evolving outlook, and the balance of risks when considering future adjustments to the federal funds rate target range. There were four dissents 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, trading approximately 0.5% lower over the past 24 hours, at just below $76,000. US stocks experienced modest declines, with the Nasdaq down 0.35%.

Yields increased, with the two-year Treasury rising 9 basis points to 3.93% and the 10-year Treasury 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 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, as traders 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, putting the US central bank in a difficult position: which of its mandates – prices or economic growth – should it prioritize?