As widely anticipated, the US Federal Reserve maintained its benchmark federal funds rate within the range of 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 indications of slowing economic growth. In its policy statement, the Fed noted that it will carefully evaluate incoming data, the evolving economic outlook, and the balance of risks when considering future adjustments to the federal funds rate target range. The rate decision was met with four dissents, including one dovish and three hawkish opinions. Fed Governor Stephen Mirran advocated for a 25 basis point rate reduction, while Beth Hammack, Neel Kashkari, and Lorie Logan preferred to maintain the current rates while removing any easing bias.
The news put pressure on bitcoin, which remained approximately 0.5% lower 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 rising 9 basis points to 3.93% and the 10-year Treasury increasing 5 basis points to 4.40%. Today's central bank meeting is expected to be the last presided over by Jerome Powell, whose term as chairman ends on May 15. His successor, Kevin Warsh, who passed a Senate Banking Committee vote earlier on Wednesday, is poised 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 desired direction. Market attention will now shift to Powell's post-meeting press conference, as traders seek clues on the future trajectory 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 can contribute to increased headline inflation numbers but may also slow economic activity, placing the US central bank in a difficult position: which of its mandates – price stability or economic growth – should it prioritize?