Federal Reserve Keeps Interest Rates Unchanged, Faces Largest Disagreement in 34 Years

Key Points:

The Federal Reserve, as anticipated by the market, has paused rate cuts for three consecutive meetings, with dissenters increasing from one last time to four this time.

Of the 12 voters, four dissent, among whom Governor Milan insisted on a 25 basis point rate cut this year, and three regional Fed chairs support no rate cuts but do not support retaining an easy bias in the statement.

The statement continues to reaffirm the readiness to adjust the monetary policy stance appropriately under certain circumstances.

The statement removes the phrase "the impact of the situation in the Middle East on the U.S. economy is uncertain", instead stating that the situation in the Middle East has intensified a high degree of uncertainty about the economic outlook.

The statement adds that high inflation is partly due to recent global energy price increases.

"The new Fed mouthpiece": There is a serious divergence within the Fed on whether to suggest that the possibility of further rate cuts in the future is higher than that of rate increases.

At the last monetary policy meeting chaired by Powell, the Fed, as expected by the market, continued to do nothing, but revealed greater divisions within the decision-making layer on whether to continue rate cuts, with some officials questioning whether to continue suggesting that the possibility of rate cuts is higher than rate increases.

On Wednesday, April 29th, Eastern Time, the Federal Reserve announced that the Federal Open Market Committee (FOMC) decided to keep the target range for the federal funds rate at 3.50% to 3.75%. Thus, after three consecutive rate cuts by the end of last year, the FOMC has paused action for three monetary policy meetings since 2026.

The Fed's decision this time was entirely expected by the market. As of the close of trading on this Tuesday, CME tools showed that the futures market predicted a 100% probability of no rate cuts this week, about a 97% probability of no action at the June meeting, and only a slightly over 20% probability of rate cuts by the end of the year in December, at 21.9%.

Similar to the FOMC meeting more than a month ago, at this meeting, Fed Governor Milan, whom President Trump personally appointed last year, continued to support a rate cut. Unlike the last meeting, in addition to Milan, three other FOMC members with voting rights stood in opposition due to the accommodative stance of the resolution statement.

The above results mean that among the 12 FOMC voting members, including Powell himself, eight supported the resolution statement, and four dissented.

The senior Fed reporter known as "The new Fed mouthpiece," Nick Timiraos, pointed out that the resolution revealed that there is a more serious divergence within the Fed on whether to suggest that future rate cuts are more likely than rate increases. With four out of 12 voters dissenting, this is the most dissenters in a Fed monetary policy meeting since 1992.

Timiraos commented that the dissenting result may have pre-enacted the expectations expressed by Kevin Warsh, the nominee for the next Fed Chairman, at his nomination confirmation hearing last week. Warsh anticipated scenes of "chaotic meetings" and "internal disputes." Such divergence highlights the decision-making challenges that Warsh may face as the Fed attempts to deal with new inflation risks triggered by energy shocks.

Governor Milan insists on a 25 basis point rate cut this year, three regional Fed chairs do not support retaining an easy bias

Compared to the statement in March, the biggest difference in this meeting's statement is that four FOMC voting members do not support this resolution statement,