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 any adjustments, as policymakers carefully weigh the risks of persistent inflation against signs of a slowing economy. The Fed 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.
The rate decision was met with four dissenting votes, with one member advocating for a rate cut and three pushing for a more hawkish stance. Fed Governor Stephen Mirran proposed a 25-basis-point rate reduction, while Beth Hammack, Neel Kashkari, and Lorie Logan favored maintaining current rates while removing any easing bias. Bitcoin prices remained under pressure, declining by approximately 0.5% over the past 24 hours to trade just below $76,000.
US stocks experienced modest declines, with the Nasdaq down 0.35%. Yields surged, with the two-year Treasury increasing by 9 basis points to 3.93% and the 10-year Treasury rising by 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, who passed a Senate Banking Committee vote earlier on Wednesday, is poised to take over.
The three hawkish dissenting votes 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. Oil prices have rebounded to near their post-war highs, with WTI crude trading just shy of $105 per barrel, after initially declining earlier this month amid hopes for a lasting peace between the US and Iran.
The surge in energy costs can contribute to higher headline inflation numbers but may also slow economic activity, placing the US central bank in a difficult position as it must decide which of its mandates – price stability or economic growth – to prioritize.