Members of the Federal Open Market Committee were split 8-4. One of the opponents, Stephen Millan, had called for a rate cut.
Citing “rising” inflation and rising global energy prices, the Fed chose to keep its target interest rate unchanged on Wednesday.
The Federal Reserve said in a statement that the Federal Open Market Committee “has decided to maintain the target range for the federal funds rate at 3.5% to 3.75%.” “The Committee remains strongly committed to supporting maximum employment and returning inflation to our 2% target,” the statement added.
The decision to keep interest rates on hold followed a similar move in March, but committee members were unusually divided in their vote on Wednesday. A total of eight members, including Fed Chairman Jerome Powell, voted to keep interest rates on hold. However, the other four disagreed. Opponents included Stephen Millan, who “requested a 1/4 percentage point reduction in the target range for the federal funds rate at this meeting,” according to a Fed statement.
The other three members, while supporting the maintenance of the target interest rate, opposed it because they “do not support including an easing bias in the statement at this point.”
According to CNBC, the last time the commission’s four members spoke out against it was in 1992.
Wednesday’s meeting was also closely watched because it is likely to be Mr. Powell’s last meeting at the helm of the Fed, as he is scheduled to step down as chairman in May. President Trump nominated Kevin Warsh to replace Powell.
Mark Hamrick, senior economic analyst at Bankrate, said in a statement Wednesday that Powell “will be remembered as the Fed chairman who held the course during one of the most volatile and dynamic periods in U.S. economic history.”
“His tenure has been an extraordinary series of shocks, guiding the Fed through a sharp economic shutdown recession caused by the coronavirus, a resurgence of high inflation, tariffs, and the ongoing fallout from the Iran war,” Hamrick added. “A lot of the fallout will be on the next chair, but it was Mr. Powell who got through the initial turmoil.”
Mr. Powell is stepping down as chairman but announced Wednesday that he intends to remain a member of the Fed’s board of directors. Although he has not announced when he will retire as director, his term of office has been extended until January 2028.
Mike Fratantoni
Regarding Wednesday’s decision to hold interest rates on hold, Mike Fratantoni, chief economist at the Mortgage Bankers Association, pointed to the negative vote in a statement, saying, “Clearly, there are heightened concerns about inflation risks in this environment.”
“Expectations for a hold are universal” given inflation and geopolitical turmoil, said Stephen Cates, a financial analyst at Bankrate.
“The Fed’s path forward is by no means certain, given high oil prices and smoldering underlying inflation in goods and services,” Kates added. “Labor market concerns appear to have faded into the background. Rapidly changing global economic conditions mean the Fed cannot provide much forward guidance given the data-dependent nature of this headwind-filled environment.”
Update: This story has been updated with additional context and background after publication.
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