FOMC Meeting: Fed Leaves Interest Rates Unchanged Amid Middle East Uncertainty

The Federal Reserve has decided to hold interest rates steady for the third consecutive FOMC meeting this year amid inflation concerns, with the Iran war sending oil prices to new highs. Attention will now turn to Jerome Powell’s press conference for insights into the Fed’s current stance, which could be Powell’s last appearance as Fed chair.

Fed Holds Interest Rates Steady For Third Consecutive FOMC Meeting

In a press release, the Fed announced that it would maintain the target range for the federal funds rate at 3.50% to 3.75%. This marks the third time this year the Committee has decided to hold rates steady, following three consecutive rate cuts last year.

The Fed voted 8 to 4 in support of this decision at the FOMC meeting. Notably, Fed Governor Stephen Miran dissented in favor of a 25-basis-point rate cut, while Fed Presidents Beth Hammack, Neel Kashkari, and Lorie Logan supported the decision to hold rates steady but did not support the inclusion of an easing bias. This is the first time that the Fed has had four dissents at a meeting since 1992.

This decision at the FOMC meeting comes in line with expectations as the U.S. Fed is likely to hold rates steady until next year. Meanwhile, the decision comes amid uncertainty in the Middle East, with Fed officials yet to determine how much impact the U.S.-Iran war could have on inflation.

In the FOMC statement, the Fed said inflation is “elevated,” marking a shift from statements in which it described inflation as “somewhat elevated.” The Committee further remarked that “developments in the Middle East are contributing to a high level of uncertainty about the economic outlook.”

The Iran war continues to spark inflation concerns, especially as oil prices rally to multi-year highs. The latest is the Strait of Hormuz standoff between the U.S. and Iran, with Trump rejecting Iran’s offer to reopen the strait while the U.S. lifts its blockade at this major oil chokepoint.

Focus Turns To Powell’s FOMC Press Conference

With the Fed holding rates steady at this FOMC meeting in line with expectations, the market will now turn its attention to Jerome Powell’s FOMC press conference for insights on whether this was a hawkish or dovish rate pause. So far, Powell has not signaled that a rate hike is the base case for any Fed official, which market participants will be watching to see whether that position has changed.

Notably, this is likely to be Powell’s last press conference as Fed chair, with his term expiring on May 15. As CoinGape reported, the Senate Banking Committee advanced Kevin Warsh’s nomination as Fed chair today, with Warsh on course to be confirmed by May 15.

However, market participants predict that Warsh’s potential emergence as the next Fed chair is unlikely to lead to lower interest rates anytime soon. CME FedWatch data shows that the Fed is likely to hold interest rates steady again at the June FOMC meeting, with a 98.8% chance of that happening.