In line with market expectations, the US Federal Reserve decided to keep its benchmark interest rate unchanged at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without any adjustments, as officials continue to weigh the risks of persistent inflation against signs of a slowing economy. 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. The decision was met with four dissents, including one dovish and three hawkish votes, with some officials advocating for a rate cut and others pushing for a removal of easing bias.
The news had a moderate impact on markets, with bitcoin and US stocks experiencing slight declines, while yields rose, 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%. This meeting is likely to be the last presided over by Jerome Powell, whose term as chairman ends on May 15, and will be succeeded by Kevin Warsh, who has cleared a key Senate vote. The hawkish dissents suggest that Warsh may face challenges in implementing rate cuts, even if that is his preferred direction. Market attention will now shift to Powell's post-meeting press conference, where traders will be looking for clues on the future direction of monetary policy.
Meanwhile, oil prices have rebounded to near their post-war highs, with WTI crude trading just below $105 per barrel, posing a challenge for the US central bank as it seeks to balance its dual mandates of price stability and economic growth.