In line with market expectations, the US Federal Reserve kept its benchmark interest rate unchanged at 3.50%-3.75% on Wednesday, marking the fourth consecutive meeting without a rate adjustment, as policymakers balance persistent inflation concerns against signs of slowing economic growth. The Fed stated that it will carefully evaluate incoming data, the evolving outlook, and the balance of risks when considering future adjustments to the federal funds rate target range. The 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. The news put pressure on bitcoin, which remained approximately 0.5% lower 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 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, is on track to take over after passing 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.
Attention will now shift to Powell's post-meeting press conference, where traders will seek clues on the future path of monetary policy. Oil prices have rebounded to near their post-war highs, with WTI crude trading just shy of $105 per barrel, after pulling back earlier this month amidst hopes for a lasting peace between the US and Iran.
The surge in energy costs contributes to higher inflation numbers but can also slow economic activity, putting the US central bank in a difficult position: which of its mandates – prices or economic growth – should it prioritize?