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 a rate adjustment as officials balance persistent inflation concerns with signs of slowing economic growth. The Fed stated that it will carefully assess incoming data, the evolving outlook, and the balance of risks when considering future adjustments to the target range for the federal funds rate. 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. Bitcoin prices remained under pressure, trading about 0.5% lower over the past 24 hours, while US stocks experienced modest declines, with the Nasdaq down 0.35%. Yields rose, with the two-year Treasury increasing 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 the last to be presided over by Jerome Powell, whose term as chairman ends on May 15.
His successor, Kevin Warsh, is on track to take over after passing 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 shift to Powell's post-meeting press conference, where traders will seek clues on the future direction of monetary policy. After a sharp decline earlier this month due to hopes of 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 rising inflation, but they can also slow economic activity, putting the US central bank in a difficult position: should it prioritize controlling prices or promoting economic growth?