Monetary Policy
- The FOMC announced yesterday it will again keep the Federal Funds target rate unchanged. The current target range of 3.50 – 3.75% was established at the committee’s meeting last December.
- Four committee members voted against yesterday’s decision, but the dissenting votes themselves reflected differing views on the appropriate path of policy. While Stephen Miran dissented in favor of a quarter point cut, the other three dissenters, Hammack, Kashkari, and Logan, supported the rate decision but did not support the language in the statement.
- During the press conference, Powell indicated the number of people on the committee who would support the elimination of the easing bias in the Fed’s statement has increased, and suggested there are some on the committee who did not dissent, but could have agreed to the change in language favored by three of the dissenters.
- Yesterday’s press conference was Powell’s last as Fed chair. Fed independence was a key theme of the discussion in the press conference and Powell made strong statements about the topic.
- Powell indicated he will remain on the Fed board for now, and noted that he will not leave his role as a Fed governor until the DOJ investigation is clearly complete. He stated he is worried about attacks on the Fed’s ability to operate free of political influence, and highlighted the economic importance of an independent Fed. He indicated he will leave when he feels it is appropriate to do so. Powell further noted there are widespread concerns among Fed colleagues that political interference could continue.
- Equity market reaction was benign, with the S&P 500 ending the day down 0.04%. The yield on the 10-year US Treasury increased to 4.43%. (Source: Bloomberg)
- Future FOMC decisions may be subject to a different approach to communication under the Fed’s likely incoming chair, Kevin Warsh, who has expressed skepticism about the Fed providing forward guidance.
Economic Conditions
- Yesterday’s decision comes within the context of a sharp increase in the CPI inflation report for March, which hit 3.3% on a year-over-year basis.
- Nonfarm payroll employment increased 178,000 in March, and the unemployment rate was mostly unchanged for the month.
The FOMC is next scheduled to meet June 16 – 17th, 2026.
Disclosure
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