In line with market expectations, the US Federal Reserve opted to keep its benchmark federal funds rate range unchanged at 3.50%-3.75% on Wednesday. This decision marks the fourth consecutive meeting without a rate adjustment, as officials continue to 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 was met with four dissents, including one dovish and three hawkish votes.
Fed Governor Stephen Mirran advocated for a 25-basis-point rate cut, while Beth Hammack, Neel Kashkari, and Lorie Logan preferred to maintain current rates while removing any easing bias. Prior to the announcement, bitcoin prices had fallen by approximately 0.5% over the past 24 hours, trading just below $76,000.
US stocks experienced modest declines, with the Nasdaq down 0.35%. Yields surged, with the two-year Treasury increasing by 9 basis points to 3.93% and the 10-year Treasury rising by 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 successor, Kevin Warsh, cleared a Senate Banking Committee vote earlier on Wednesday, paving the way for him to take over as Powell steps down.
The three hawkish dissents suggest that Warsh may face challenges in implementing rate cuts, even if that is his preferred course of action. 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 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, but they can also slow economic activity. This presents the US central bank with a difficult decision: which of its mandates – price stability or economic growth – should it prioritize?