WASHINGTON – The Federal Reserve held interest rates steady on April 29, but in its most divided decision since 1992 noted rising concerns about inflation in a policy statement that drew three dissents from officials who no longer feel the US central bank should communicate a bias towards lowering borrowing costs.
A fourth dissent at the meeting came in favour of a quarter-percentage-point rate cut.
“Inflation is elevated, in part reflecting the recent increase in global energy prices,” the Fed said in its policy statement, a shift from previous language saying that inflation was just “somewhat” elevated.”
“Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook,” it said.
The 8-4 vote was the most divisive since Oct 6, 1992, and shows the breadth of opinion presumed incoming Fed Chair Kevin Warsh will face in pursuing rate cuts that President Donald Trump says he expects from his chosen successor to Mr Jerome Powell, whose term as central bank chief ends on May 15.
Though the latest policy statement retained language about how the Fed would assess the “extent and timing of additional adjustments” to rates, a phrase that pointed to future cuts as the next likely move, three policymakers objected.
Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan, while supportive of holding the policy rate steady in the current 3.50 per cent-3.75 per cent range, “did not support inclusion of an easing bias in the statement at this time” and voted against the new statement.
In a press conference held after the Fed meeting, Mr Powell said “we are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook and the balance of risks.”
He added, “monetary policy is not on a preset course, and we will make our decisions on a meeting-by-meeting basis.”
With global oil prices lodged above US$100 (S$128) a barrel due to the US-backed war against Iran, the Fed has been hard-pressed to determine if the impact is likely to be seen more through depressed growth or higher inflation, keeping the policy rate in the range where it has been since December despite repeated demands by Mr Trump for looser monetary policy.
Alongside elevated inflation, “the unemployment rate has been little changed in recent months” while the economy continues to expand “at a solid pace,” the Fed said.
Stocks on Wall Street remained in negative territory after the release of the statement. US Treasury yields rose. Futures markets were pricing in little chance of a Fed rate cut by the end of 2026.
Mr Omair Sharif, president of forecasting firm Inflation Insights, said in a note to clients that the fractious policy vote made some level of sense. “The new statement upgraded the concern on inflation,” he said, adding that it is “not surprising” some officials didn’t agree with the move to retain an easing bias given price pressure worries.
The new statement is likely the last to be issued under Mr Powell’s leadership.
Earlier on April 29, the Republican-controlled Senate Banking Committee voted to advance Mr Warsh’s nomination on a party-line 13-11 vote. The Senate is expected to confirm Mr Warsh in May.
The minutes of the Fed’s March 17-18 meeting noted a growing number of policymakers were open to the idea that the central bank’s next move might be a rate increase, and the number of hawkish dissents may prompt investors to boost bets that borrowing costs will rise in 2026.
Since the March meeting, inflation has shown signs of rising, with officials concerned that sustained high global oil prices could evolve from a one-time price shock to a jump in underlying pressure on prices.
Fed Governor Stephen Miran, in what may also be his last meeting, again dissented in favour of a rate cut, having dissented in favour of easier policy at every meeting since moving to the central bank from his prior job as one of Mr Trump’s top economic advisers. REUTERS
