In line with market expectations, the US Federal Reserve maintained its benchmark interest rate range at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without a change, as officials balance persistent inflation concerns against 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 further adjustments to the target range for the federal funds rate. There were four dissents to the rate decision, with 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 hold rates steady and remove any easing bias. The news put pressure on bitcoin, which remained about 0.5% lower over the past 24 hours, trading just below $76,000. US stocks experienced modest declines, with the Nasdaq down 0.35%, and yields rose, with the two-year Treasury up 9 basis points to 3.93% and the 10-year up 5 basis points to 4.40%.
This central bank meeting is likely to be the last presided over by Jerome Powell, whose term as chairman ends on May 15, and will be succeeded by Kevin Warsh, who passed a Senate Banking Committee vote earlier 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 turn to Powell's post-meeting press conference for clues on the future 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 shy of $105 per barrel.
Higher energy costs can contribute to headline inflation numbers but also slow economic activity, putting the US central bank in a difficult position: which of its mandates – prices or economic growth – should it prioritize?