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 change, as officials balance persistent inflation concerns 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 future adjustments to the target range for the federal funds rate. 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 rates while removing 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 rising, 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 meeting is likely to be the last presided over by Jerome Powell, whose term as chairman ends on May 15, and will be replaced by Kevin Warsh, who passed a Senate Banking Committee vote earlier on Wednesday. The three hawkish dissents suggest 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. 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 amid hopes for a lasting peace between the US and Iran.
The surge in energy costs poses a challenge for the US central bank, as it must decide which of its mandates - prices or economic growth - to prioritize.