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 a change, as policymakers weigh the risks of persistent inflation against signs of a slowing economy. 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 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 the current rate while removing any easing bias. The news put pressure on bitcoin, which remained around 0.5% lower over the past 24 hours, trading just below $76,000.
US stocks experienced modest declines, with the Nasdaq down 0.35%, and 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%. This central bank meeting is likely to be the last 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 turn to Powell's post-meeting press conference for clues on the future of monetary policy.
After a sharp decline earlier in the 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. The increase in energy costs can contribute to higher inflation numbers but may also slow economic activity, putting the US central bank in a difficult position as it decides which of its mandates to prioritize.