As anticipated, 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 carefully weigh the risks of persistent inflation against signs of a slowing economy. The Federal Reserve stated that it will closely assess incoming data, the evolving economic outlook, and the balance of risks when considering future adjustments to the federal funds rate target range. There were four dissenting votes on the rate decision, with one member advocating for a rate cut and three pushing for a more hawkish stance.
Fed Governor Stephen Mirran favored a 25-basis-point rate reduction, while Beth Hammack, Neel Kashkari, and Lorie Logan preferred to maintain the current rates while removing any bias towards easing. Prior to the announcement, bitcoin prices had declined by approximately 0.5% over the past 24 hours, trading near $76,000, while 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 likely to be the last presided over by Jerome Powell, whose term as chairman concludes 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 dissenting votes 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 on 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, placing the US central bank in a difficult position: should it prioritize controlling prices or promoting economic growth?