Citing “elevated” inflation and rising global energy prices, the Federal Reserve on Wednesday opted to leave its target interest rates unchanged.
In a statement, the Fed said that its Federal Open Market Committee “decided to maintain the target range for the federal funds rate at 3.5 to 3.75 percent.” The statement added that the “committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.”
Though the decision to leave rates unchanged follows a similar move in March, members of the committee were unusually split in their votes on Wednesday. In total, eight members — including Fed Chair Jerome Powell — voted to keep rates steady. However, four others dissented. The dissenters included Stephen Miran, who, according to the Fed’s statement, “preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting.”
Three other members dissented because, while they supported maintaining the target rate, they “did not support inclusion of an easing bias in the statement at this time.”
According to CNBC, the last time four members of the committee dissented was all the way back in 1992.
Wednesday’s meeting was also notable because it is likely to be the last with Powell at the Fed’s helm, as he is due to step down as chairman in May. President Trump has nominated Kevin Warsh to replace Powell.
Speaking about Powell, Bankrate Senior Economic Analyst Mark Hamrick said in a statement Wednesday that he will “likely be remembered as a Fed chairman who held the line during one of the most volatile and dynamic stretches of American economic history.”
“His tenure ran through an unusual run of shocks, guiding the Fed through the sharp COVID-shutdown recession, the return of elevated inflation, tariffs and the ongoing fallout from the Iran war,” Hamrick added. “Much of that impact will land on the next chair, but Powell was the one who navigated the initial turbulence.”
Though Powell is stepping down as chairman, he revealed Wednesday that he plans to remain on the Fed’s Board of Governors. He did not say when he will leave the board, though his term extends through January 2028.
Mike Fratantoni
Speaking of Wednesday’s decision to hold rates steady, Mike Fratantoni — chief economist for the Mortgage Bankers Association — pointed in a statement to the dissenting votes and said “clearly, there are growing concerns regarding the inflation risk in this environment.”
Bankrate Financial Analyst Stephen Kates said that “expectations for a hold were universal” given inflation and geopolitical turmoil.
“The path forward for the Fed is far from certain, given high oil prices and simmering underlying inflation in goods and services,” Kates added. “The labor market concerns appear to have fallen to the background. The quickly changing circumstances in the global economy mean the Fed will be unable to offer much forward guidance, given the data-dependent nature of this headwind-filled environment.”
Update: This story was updated after publication with additional context and background.
