FOMC decision: No change in rates as expected
The final FOMC decision with Jerome Powell as chair:
- Prior was 3.50-3.75%
The FOMC wraps up its two-day meeting this afternoon, and for once the rate decision itself is the easy part. The committee is universally expected to leave the funds rate at 3.50–3.75%, where it has sat since the start of the year. Rates markets aren’t pricing a single basis point of movement. The interesting stuff is everywhere else.
The setup heading in is genuinely awkward. The Iran conflict and the disruption around the Strait of Hormuz blew a hole in the inflation picture in March, dragging headline CPI back up to 3.3% from a far more comfortable 2.4% in February. April nowcasts have it pushing toward 3.6%. That’s the highest print in close to three years and it lands at exactly the wrong moment for a Fed that had finally convinced itself disinflation was on track. Energy is doing most of the damage, but the worry is always second-round effects.
On the other side of the mandate, the labor market has cooled. Not falling out of bed, but cooled — hiring has slowed, the unemployment rate has drifted higher, and wage growth has eased. Retail sales and the April PMIs have held up better than feared, so it’s not a growth scare. It’s the uncomfortable middle ground where neither side of the dual mandate is screaming for action.
Then there’s the Powell factor. This is almost certainly his final meeting in the chair, with Kevin Warsh on track to take over in May after clearing the Senate Banking Committee last week. That hangs over everything. The press conference, normally the main event, has to be read through the lens of a chair who can’t credibly commit his successor to anything. With no SEP and no dot plot today, the statement wording and Powell’s tone are doing all the work.
This article was written by Adam Button at investinglive.com.