In line with market expectations, the US Federal Reserve decided to keep its benchmark interest rate unchanged at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without any adjustments, as officials continue to balance the risks of persistent inflation against signs of a slowing economy. 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. The rate decision was met with four dissents, including one dovish and three hawkish votes.
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 rate while removing any easing bias. Prior to the announcement, bitcoin prices remained under pressure, trading approximately 0.5% lower over the past 24 hours, at 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 the last presided over by Jerome Powell, whose term as chairman ends 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 dissents suggest that Warsh may face challenges in implementing rate cuts, even if that is his preferred 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. 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 increased headline inflation numbers but may also slow economic activity, placing the US central bank in a difficult position: should it prioritize controlling prices or promoting economic growth?