In line with market expectations, the US Federal Reserve opted to keep its benchmark interest rate unchanged at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without a rate adjustment as policymakers continue to balance persistent inflation concerns against signs of a slowing economy. The Fed stated 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 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 near $76,000.
US stocks experienced modest declines, with the Nasdaq down 0.35%. Yields rose, with the two-year Treasury increasing by 9 basis points to 3.93% and the 10-year Treasury up 5 basis points to 4.40%.
Today's central bank meeting is likely to be Jerome Powell's last as chairman, with his term ending 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 desired course of action. Market attention will now shift to Powell's post-meeting press conference, where traders will seek clues about the future direction 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 below $105 per barrel. Higher energy costs can contribute to increased headline inflation, but they can also slow economic activity, putting the US central bank in a difficult position: which of its mandates – price stability or economic growth – should it prioritize?