As anticipated by the market, the US Federal Reserve decided to keep its benchmark fed funds rate range unchanged at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without any adjustment, as officials carefully weigh the risks of persistent inflation against signs of a slowing economy. In its policy statement, the Fed stated that it will thoroughly assess incoming data, the evolving economic outlook, and the balance of risks when considering further adjustments to the target range for the federal funds rate. The rate decision was met with four dissents, including one dovish and three hawkish views. 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 rates while removing any easing bias.
Prior to the announcement, bitcoin prices remained under pressure, with a 0.5% decline over the past 24 hours, trading just below $76,000. 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 Jerome Powell's last as chairman, with his term ending on May 15. His successor, Kevin Warsh, is poised to take over after clearing the Senate Banking Committee vote, but the three hawkish dissents suggest that he may face challenges in implementing rate cuts. Market attention will now shift to Powell's post-meeting press conference, where traders will be looking for 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 shy of $105 per barrel.
The increase in energy costs will likely contribute to higher headline inflation numbers, but it may also slow down economic activity, putting the US central bank in a difficult position: should it prioritize controlling prices or promoting economic growth?