An unusually divided Federal Reserve on Wednesday held its key interest rate steady as policymakers grappled with the policy impact of persistent inflation and awaited a looming leadership transition at the central bank. In what may have been Chair Jerome Powell’s final meeting at the helm, the rate-setting Federal Open Market Committee voted to hold the benchmark funds rate in a range between 3.5%-3.75%. Markets had been pricing in a 100% chance of no change. However, the meeting saw a dramatic turn amid a groundswell of officials who opposed messaging that further rate cuts could be ahead. Amid expectations for a routine vote to hold the benchmark funds rate steady, the FOMC instead was split along 8-4 lines, with officials expressing different reasons for their vote. The last time four FOMC members dissented was in October 1992.
Separately, during a news conference following the central bank’s decision, Powell signaled that he would remain on the Board of Governors for an indefinite period. He said he is waiting until an investigation into Federal Reserve’s renovations “is well and truly over with transparency and finality.” “In a term generally marked by consensus building and few dissents, Chair Powell concludes his term with 4 dissents,” Brent Schutte, chief investment officer at Northwestern Mutual, wrote in an email. “This not only highlights the potential for more of the same in the coming months as a new Chair focused on changing the Fed takes over, but also the reality that the nearer term economic outlook remains highly uncertain given conflicting labor market and economic growth signals against a backdrop of inflation that has been stuck at 3% plus since the end of 2023.”
Source: CNBC
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