As anticipated by the markets, the US Federal Reserve maintained its benchmark federal funds rate range at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without any changes, as officials balance persistent inflation risks with signs of slowing economic growth. The Fed stated in its policy statement, 'The Committee will carefully assess incoming data, the evolving outlook, and the balance of risks when considering the extent and timing of additional adjustments to the target range for the federal funds rate.' There were four dissents to the rate decision, with one being dovish and three being hawkish.
Fed Governor Stephen Mirran preferred reducing rates by 25 basis points, while Beth Hammack, Neel Kashkari, and Lorie Logan wanted to maintain rates while removing any easing bias. Prior to the news, bitcoin remained approximately 0.5% lower over the past 24 hours, trading just below $76,000, while US stocks experienced modest declines, with the Nasdaq down 0.35%.
Yields increased, with the two-year Treasury up 9 basis points to 3.93% and the 10-year up 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 ends on May 15. His replacement, Kevin Warsh, passed a Senate Banking Committee vote earlier on Wednesday, putting him on track to take over as Powell steps down. The three hawkish dissents indicate that Warsh will face a challenging task in pushing through rate cuts, even if that is the direction he would like to pursue.
Attention will shift to Powell's post-meeting press conference, where traders will seek clues on the path forward for 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 contribute to headline inflation numbers but can also slow economic activity, placing the US central bank in a difficult position: which of its mandates – prices or economic growth – should it prioritize?