The Fed left interest rates unchanged on Wednesday, triggering a widely expected lull in markets, but traders focused on the possibility of Chairman Jerome Powell’s final FOMC news conference.
The Federal Open Market Committee maintained its target range for the federal funds rate at 3.5% to 3.75%, saying recent indicators suggest economic activity continues to expand at a steady pace. The Fed said job growth remains low on average, the unemployment rate has changed little in recent months and inflation remains high, partly reflecting recent increases in global energy prices.
At the time of writing, Bitcoin was trading near $76,000, flat on the day, while major U.S. stock indexes were down slightly. The sluggish reaction reflected that the market had already priced in no interest rate change even before the announcement.
The statement also further strengthened the focus on geopolitical risks, noting that developments in the Middle East are contributing to the high degree of uncertainty surrounding the economic outlook. Policymakers said they remained mindful of the risks of both the Fed’s dual mandate of maximum employment and 2% inflation.
Powell’s comments are now the main focus for traders watching for signals on inflation, unemployment, energy-driven price pressures and the Fed’s next policy actions. His comments carry added weight as this could be his last FOMC meeting as chairman, and markets are also focused on how he will respond to leadership changes and the central bank’s outlook after he leaves office.
The focus has also shifted to leadership changes after the Senate Banking Committee voted Wednesday to move forward with the nomination of Kevin Warsh to replace Powell as Fed chair. Warsh’s nomination now heads for a formal vote in the Senate, adding further uncertainty to a market already weighing the Fed’s interest rate path, inflation risks and signs of a cooling labor market.
The results of the vote revealed a sharp divide in opinion within the committee. Stephen Milan opposed the decision as he wanted a 25 basis point cut, while Beth Hammack, Neil Kashkari and Rory Logan supported keeping rates on hold but opposed including an easing bias in the statement.
The Fed said it will continue to evaluate incoming data, the evolving outlook, and the balance of risks before deciding on further policy adjustments. The committee added that it remains strongly committed to supporting maximum employment and returning inflation to its 2% target.
