In line with market expectations, the US Federal Reserve kept 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 assess incoming data, the evolving outlook, and the balance of risks when considering future adjustments to the federal funds rate target range. 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.
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%, and yields surged, with the two-year Treasury up 9 basis points to 3.93% and the 10-year Treasury up 5 basis points to 4.40%. Today's 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 the Senate Banking Committee vote.
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, where traders will 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. The rise in energy costs can contribute to higher headline inflation numbers but may also slow economic activity, putting the US central bank in a difficult position as it weighs its dual mandates of price stability and economic growth.