US | Fed remains on hold as easing bias faces growing dissent

Summary

Three voting regional presidents, while supporting the decision to hold rates steady today, did not back the statement’s easing bias, signaling a growing view within the Committee that the scope to resume rate cuts this year is becoming increasingly limited.

Key points

• Key points:
• As widely expected, the Fed left rates unchanged at 3.50-3.75% and paved the way for a potential removal of its easing bias should higher energy prices persist.
• On the policy outlook, Powell reiterated that the current stance remains well positioned, although that assessment could shift as soon as the next meeting.
• The focus of Powell’s press conference was on his decision to remain on the Board as Governor after his term as Chair ends next month.
• His decision points to a subtle hawkish shift in the Committee since Warsh’s appointment as Chair implies a rotation that would see Governor Miran step aside.
• Historically unusual dissents and Powell’s remarks on his future at the Fed suggest rates will remain firmly on pause, with increasing odds of no cuts this year.

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