“Inflation is elevated, in part reflecting the recent increase in global energy prices.” In part. And in part for other reasons.
By Wolf Richter for WOLF STREET.
The FOMC voted today to leave the Fed’s five policy rates unchanged for the third meeting in a row, following three rate cuts in 2025 of 75 basis points combined, and three cuts of 100 basis points combined in 2024.
There were four dissents, the most since 1992: Miran dissented because he wanted a 25-basis point rate cut. Three others – Hammack, Kashkari, and Logan – dissented though they supported maintaining the target range at this meeting, but “did not support inclusion of an easing bias in the statement at this time.” They wanted a symmetrical statement, that indicated that the next move could be either a rate cut or a rate hike.
This concept that the next move could be either a cut or a hike was already discussed at the last meeting, as we know from the last press conference and meeting minutes. Now it made it into the statement.
Let there be dissents – they’re a breath of fresh air.
The FOMC left its five policy rates unchanged today:
- Target range for the federal funds rate: 3.5%-3.75%.
- Interest it pays the banks on reserve balances (IORB): 3.65%.
- Interest it pays on overnight Reverse Repos (ON RRPs): 3.50%
- Interest it charges on overnight Repos at its Standing Repo Facility (SRF): 3.75%.
- Interest it charges banks to borrow at the “Discount Window” at 3.75%.
Major changes in the statement:
The statement was primarily worried about inflation, and less worried about the economy and labor market. That shift had taken place at the last meeting and was further clarified in this meeting:
New: “Recent indicators suggest that economic activity has been expanding at a solid pace.”.
Old: “Available indicators suggest that economic activity has been expanding at a solid pace.”
New: “Job gains have remained low, on average, and the unemployment rate has been little changed in recent months.”
Old: “Job gains have remained low, and the unemployment rate has been little changed in recent months.”
New: “Inflation is elevated, in part reflecting the recent increase in global energy prices.”
Old: “Inflation remains somewhat elevated.”
New: “Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook.”
Old: “Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain.”
This sentence was unchanged: “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”
And this sentence was unchanged: “The Committee is attentive to the risks to both sides of its dual mandate.”
This was a no-dot-plot meeting – one of the four a year when the FOMC does not release a “Summary of Economic Projections,” which includes the “dot plot” that indicates how each FOMC member that day sees the development of future policy rates, inflation, GDP growth, and unemployment. The FOMC will release the next Summary of Economic Projections at the June meeting.
And here is Powell at the press conference: Regime Change: Powell, Chair of Mega-QE & “Ample Reserves Regime,” to Be Replaced by Warsh, who Wants a Smaller Balance Sheet
The whole statement:
“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, on average, and the unemployment rate has been little changed in recent months. Inflation is elevated, in part reflecting the recent increase in global energy prices.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook. The Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3‑1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Philip N. Jefferson; Anna Paulson; and Christopher J. Waller. Voting against this action were Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting; and Beth M. Hammack, Neel Kashkari, and Lorie K. Logan, who supported maintaining the target range for the federal funds rate but did not support inclusion of an easing bias in the statement at this time.”
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Bonds cratering this afternoon. Whoopsie!
Jerome Powell says he’ll stay at Fed as governor until 2028 after his term as chair ends in mid-May
He didn’t say “until 2028”
He said: “for a period of time” until the investigation by the Department of Justice “is well and truly over with transparency and finality”
And he added: “I am encouraged by recent developments and watching the remaining steps in this process carefully.”
And he said: “I’m waiting for the investigation to be well and truly over with finality and transparency. And I’m waiting for that. And I will leave when I think it’s appropriate to do so.”
All that could happen by May 15, when his term as Chair expires, and then he can ride into the sunset. You could tell he wants to get outa there. He’s had enough.
Cratering? Now that’s funny. Barely a budge.
Pretty clear Miran needs to GTFO.
You dont see a 14 basis point increase in one day as significant?
it’s a tragedy in your mind that we can’t resurrect Paul Volcker from the tomb and make him Fed chair again.
AI layoffs will be accelerating like mad this year, and you think we need higher interest rates. Unbelievable.
We need less AI.
Nice to see the Fed acknowledge the overarching impact that increasing energy prices may have on the US economy.
My understanding is that prices are set at the margin so higher global prices will drive up US energy prices.
Trump is letting the oil companies export at will. That drives their profits and we pay pay at the pump, higher electric and heating/cooling, etc.
Europe is getting hosed.
Actually apparently Europe’s stock market is the only one doing well right now.
Trump has the ability to limit exports without congressional approval. He may do that if energy prices in the US become a serious issue.
Sure. If he wants to potentially actually cede a senate seat or two to the dems. I sit in XOMs HQ. My colleagues have a strong Texas libertarian lean. So do my neighbors in The Woodlands.
We’ve talked about this potential. Everyone here is money addicted. Try to go full populist on this industry and it will absolutely flip.
Our capital project cost have already take a step change due to Trump’s tariffs (we’d love to buy exclusively US steel, that industry abandoned this country 20 years ago). Our Chinese competitors on the chemicals side are 100% exempt though because our products are “critical”.
An oil or LNG export ban is not that important. It’s the refined products that are the problem and where potential executive action should focus.
Though, I’m not sure what commands on paper can do to improve domestic refinery capacity – immediately.
Wasn’t it Obama that signed off on the Consolidated Appropriations Act of 2016 that allowed US crude to be exported?
Before 2016, the US had no crude to export. In 2016, Congress repealed the long‑standing crude‑oil export ban.
It’s about time, but always seem to be behind the curve. How much does inflation have to increase before hikes are actually on the table?
As much as it takes to get 3 more members of the 12 member FOMC to vote for the Federal Reserve to hike interest rates
When it bleeds out of CPI and into core before the fed will act, with this administration, is my guess.
Look through has become the new transitory.
“After my term as chair ends on May 15, I will continue to serve as a governor for a period of time to be determined. I plan to keep a low profile as a governor,” Powell said in a press conference following the latest Federal Open Market Committee meeting.
Translation:
Rate hikes coming. Powell to Trump: “Go ahead, make my day!”
Bye Powell. Wall Street Bets will miss you!
Jerome Powell will continue to be a member of the Federal Reserve Board of Governors until 2028. It is that moron Miran that will have to go away.
He didn’t say “until 2028”
He said: “for a period of time” until the investigation by the Department of Justice “is well and truly over with transparency and finality”
And he added: “I am encouraged by recent developments and watching the remaining steps in this process carefully.”
And he said: “I’m waiting for the investigation to be well and truly over with finality and transparency. And I’m waiting for that. And I will leave when I think it’s appropriate to do so.”
All that could happen by May 15, when his term as Chair expires, and then he can ride into the sunset. You could tell he wants to get outa there. He’s had enough.
If he leaves the Board by May 15, Miran can stay. If not, Miran will bow out as per agreement with the White House.
Driving through Kettleman, CA.
Gas Prices $6.09-$6.49 per gallon unleaded. No one at the pumps for 60 minutes.
Shop manager said business way down, in particular East-West traffic from Central Valley (ie. Fresno) to Salinas Valley/Central Coast (Paso Robles/San Luis Obispo).
These are, basically, per manager, Covid levels of traffic.
He ascribed this 100% to the price of gas impacting optional trips.
North/South on the 5, we saw plenty/usual amount of trucks, but fewer passenger cars than usual.
This seems to be global energy price inflation showing up for local businesses and consumer behavior…at least in this anecdote.
You also have to wonder when consumers will see the impact of the cost of Diesel powering those North/South trucks?
$3.58/ gal regular…
Lots of vehicles at the pumps
Life goes on
It’s Kettleman City. The correct name may not mean much to you, but to the residents of Kettleman City it is important. It is a kind of subtle sarcasm.
So let’s raise rates, that sure will bring gas prices down.
Clueless comment. Core PCE inflation was 3% yoy in February BEFORE the Iran war. PCE Inflation has been accelerating for months before the war. In the three months of Dec, Jan, and Feb, the month-to-month reading was over 4% annualized. Nothing to do with gas. Gas prices will hit the March PCE price index TOMORROW.
I was watching Powell today and I thought he said core PCE was running 3.2%.
He seemed rather ambivalent about missing his inflation target by better than 50%.
The figure I cited was for February, the latest available. He was talking about an estimate for the March PCE, which we’ll get on Thursday. But it can be partially figured from CPI for March and PPI for March, there’s an app for that. And the Fed people have that app, and I don’t. He does that regularly, give a preview of PCE inflation. It’s usually pretty close.
pass the potatoes please,
I never judge anything nationwide by California. I drove to Boise and happy about prices. Locals not so much! At least affordability in other areas in California offsets it.
Kettleman City always has the highest gas prices on I-5. Sometimes by 10-20%. It pays well to drive another 20-30 minutes, whichever way you’re going.
That plus the cool weather and “non-holiday” season explains the poor traffic there.
Powell looked at ease today.
This is so totally uber insane. We are led by imbeciles. To fight an external inflation shock, they want to make domestic credit more expensive to slow the economy even more. In addition, they never consider the almost $1 trillion we pay in interest on our so called debt, because – of course – this newly printed money in the form of our deficit has nothing to do with inflation. Plenty of academics explain in detail, and have proven, that they got it backwards. But hey, old habits don’t die easily,
This is blatant sarcasm, isn’t it? (I hope)
Everything except the being led by imbeciles part. That was spot on!
Whoa, whoa, whoa. Let’s step back from the ledge and put the Kool-aid down. Nice and easy now…
Powell is going to hang around for two more years to stick it to Trump. I see some of the Fed governors make speeches. Powell’s should be particularly entertaining.
No. He didn’t say “until 2028,” he said: “for a period of time” until the investigation by the Department of Justice “is well and truly over with transparency and finality”
And he added: “I am encouraged by recent developments and watching the remaining steps in this process carefully.”
And he said: “I’m waiting for the investigation to be well and truly over with finality and transparency. And I’m waiting for that. And I will leave when I think it’s appropriate to do so.”
All that could happen by May 15, when his term as Chair expires, and then he can ride into the sunset. You could tell he wants to get outa there. He’s had enough.
If he leaves the Board by May 15, Miran can stay. If not, Miran will bow out as per agreement with the White House.
And he said: “I’m waiting for the investigation to be well and truly over with finality and transparency. And I’m waiting for that. And I will leave when I think it’s appropriate to do so.”
The last sentence is not necessarily dependent on the first two. Powell will leave when “it’s appropriate to do so”. He will define “appropriate”, in other words, when he feels like it.
I wrote he will stay another two years. I thought it was obvious that it was a prediction, because nobody knows for sure about what will happen in the future, except maybe we can be pretty sure of death and taxes. Maybe I should have prefaced my comment with the word “Prediction.”
Logically, the IRGC should agree to give up their uranium and open the Strait in return for the ceasing of hostilities….but this is a regime that thrives on terrorism and violence, so they are unlikely to agree to much. They realize Trump is very reluctant to invade and remove the IRGC because America will take serious casualties. The blockade will slowly, then quickly erode the Iranian economy so I believe that’s the likely outcome…..a continuation of the blockade until Iran goes bankrupt. It’s a game of chicken. I expect inflation to rise because of transportation costs….everything is moved by rail, truck or plane. Expect more inflation but I suspect it will be below 6%, maybe below 5%. At some point the Strait will open because Iran needs to export and import.
“but this is a regime that thrives on terrorism and violence, so they are unlikely to agree to much.”
Well they agreed to the Joint Comprehensive Plan of Action didn’t they? How is the US in a better place now than in 2018?
For one, the blockade isn’t 100%. Some Iranian ships are getting through. Not many, but some.
For two, running the blockade is very expensive both in direct costs and indirect costs. Right now the U.S. Navy is running their ships at a pace that cannot be kept up for too long. Maintenance is not being done. There are long term problems to running at this pace. Other indirect costs are the loss of power projection elsewhere in the world. Having 2 or 3 aircraft carriers and a dozen destroyers enforcing the blockade means they cannot be elsewhere in the world.
Don’t get me wrong, the Iranian economy is going suffer, but there is going to be substantial costs to the U.S. as well.
I know we live in virtual bubbles controlled mostly by algorithms now whose sole goal is engagement but unless my bubble is warped there is no real end in sight for gas prices and related inflation from petroleum products any time soon, perhaps a year or more. The US is more isolated than much of the world but only so much. Doesn’t feel like markets have really baked that in or perhaps markets are mostly optimistic. I don’t consider myself a boomer so feels like I am out of sync somewhere.
Doomer!
Although I am seeing the inflation at the gas pump and in a lot of other places in my life, I still see a lot of construction activity here in New England. Lots of “Luxury” condo and apartment construction with adjacent retail construction going on throughout the area. Crane activity in many of the downtown cities I travel through. Road construction everywhere. People are still traveling and vacationing. The resort I am staying at in coastal Maine was chock full of families all last week for spring break. Lots of retirees at all of the favorite travel locations.
Mr. Wolf quotes the Federal Reserve: “This sentence was unchanged: “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.””
We don’t actually know what the Committee’s goals are from this sentence. We are forced to assume this is the so-called full employment and monetary stability mandate. However, the Committee’s goals could be anything.
The Committee tells you exactly what its goals are: low unemployment and 2% inflation. that’s written into everyone of its Summary of Economic Projections, which are released 4 times a year. In addition, every press conference hammers that home, along with every Fed head that is talking about monetary policy.
But Wolf, we’ve had low unemployment for multiple years and nowhere near 2% inflation. It’s difficult to believe the Fed takes its mandate seriously (despite all the “protestations” to the contrary).
Powell explained this many times, including today: They want to bring inflation down but not increase unemployment. They want to do it the pain-free way, so slowly. Volcker caused a huge amount of economic damage. Many thousands of companies went bankrupt. Thousands of banks collapsed (they were smaller and more numerous back then). Unemployment went over 10% and stayed over 7% for many years. It was a terrible time to start out. I got out of grad school in 1981, in the middle of all this. I was working in a Taco Bueno because I couldn’t find a job. The economy was a horror show back then if you didn’t have a job. The Powell Fed wanted to avoid that. And they did. But inflation is 3% and heading higher. So, if inflation doesn’t turn around on its own, they’re eventually going to hike rates some more. But no one is interested in increasing unemployment.
Hi Wolf – I don’t think the electorate will accept another Volcker-type recession without going full socialist, or some other bad thing. It’ll be hell. People have almost no trust in government, and the way things are trending for both Dems and Repubs and with the Fed being almost all Jews, the blame will go to “the Jews”. But the upset in the population will be immense. Equity owners have had it so good for the last 40 years, they will go beserk, and the middle class and lower classes will sharpening pitchforks for the politicians. I think the only way out is inflation that keeps nominal equity prices high and keep employment high, and avoids widespread mortgage foreclosures.
Mr. Wolf: The FOMC leaving out the actual policy goals reframes the discussion to the committee’s consensus on whether they believe the goals have been met and then some comment on dissent from the majority. In this case we have a personality discussion rather than a substantive discussion on the actual merits of the FOMC”s position in light of the actual financial data. There is no discussion of economic data for a “data driven FOMC” and it’s relation to the “use of their [economic] tools.”
To a native English speaker, the purposely poor English composition demonstrates an apparent FOMC evasion of a sustantative discussion on the merits. This press release, in the aspect of the FOMC’s goals, does not meet High School composition standards; i.e., an English teacher in red pen would have graded the paper as: “what goals” and “a further discussion is needed to fill out the paragraph” that in reality contains nothing more than an introductory sentence.
Where’s the No Kings Protest against Powell: Unelected Bureaucrat refuses to leave office when term expires. Given the hot inflation numbers, the Fed must reduce money supply growth. However, the corrupt Powell has no credibility with Trump because Powell expanded monetary policy under Biden. Most of our problems with inflation is directly related to Powell’s ignoring economic monetary theories to help the Democrats during Biden’s presidency. In conclusion: Powell is a dishonest political hack. Trump knows it. The U.S. needs a credible Fed chairman. We need another Paul Volker.
@Milton Friedman
If I’m understanding Wolf’s articles on the subject, Powell’s term as governor does not expire until 2028. And I’m not so sure that 9% inflation helped the Democrats.
one of the big reasons Biden lost was the surge of inflation; Republicans milked that surge of inflation for the entire time day in and day out. “Biden did it” – remember that? Americans hate inflation, and they will and did vote presidents out of the office for it. See Carter and Biden. If anything, Powell’s reckless inflation policies in 2020-2022 helped Biden lose and helped hand the presidency to Trump.
What I will remember is 9% inflation, the 20% inflationary spike over four years, MBS purchases after housing prices rose 100%, Federal Reserve balance sheet growth of 50% (approximately twice GDP growth), decreased living standards for the masses, and expansion of the everything bubble.
I just hope there isn’t some kind of economic/financial shock because now Trump has his boys in treasury and fed, And they have not been shy about throwing money around.
“ The Trump administration announced two more payouts Monday for energy companies to walk away from U.S. offshore wind projects under development.
Bluepoint Wind and Golden State Wind have agreed to end their offshore wind leases in exchange for reimbursements totaling nearly $900 million. Both companies have decided not to pursue any new offshore wind projects in the U.S., the Interior Department said Monday. Bluepoint Wind is an offshore wind project in the early stages of development off New Jersey and New York, while Golden State Wind is a floating offshore wind project proposed off California.
The department said it’s following the model of its recent deal with the French company TotalEnergies, which is getting a $1 billion payout to end projects off North Carolina and New York. — Associated Press”
Stock market bubble update: The S&P 500 market cap broke $65 TRILLION today, $65.033 Trillion at the close of trading. (That is not all stocks, just the S&P 500!!)
The top eight tech stocks now have a combined market cap of almost $25 Trillion, more than 38% of the index. $25 Trillion is also more than $3000 for every person on the planet.
The stock market is officially in the Twilight Zone.😁
If Google’s profits don’t show why big tech needs to be broken up, I don’t know what does.
$65 billion in profits in one quarter, $250 billion a year, is just obscene.
During the tech bubble of the late 1990’s traders would joke about how Intel was the “World’s biggest hedge fund” because they had investments in many other tech companies. I remember they even talked about it on CNBC. All the big tech companies would invest in each other and a big part of their revenues would come from themselves. It’s known as “Circular Financing,” and it’s not a problem until it becomes a problem. People are questioning if what is going on now is the same sort of nefarious activity that took place during the internet bubble. I have no evidence that any of Google’s revenues are not genuine, but I am very skeptical.
It’s not even just the circular financing, but the fact that the big tech companies have revenues and profits that go up 25% a year while the economy grows at 2%. That just means they’re swallowing more and more every year, to the detriment of every other business.
Everything about google is insane.
I was trying to find this information but couldn’t.
If Powell stays after May 2026 as a governor, will he be a voting or a non-voting member of FOMC? I am guessing he should vote as Miran will make way for Warsh and so should be status quo in voting rights for others.
Also how does the voting on balance sheet reduction work? Does it also need an explicit vote from the voting members? If so, then Powell should be expected to vote against any attempts to dismantle his ample reserves regime.
All of this is of course conjecture. The most likely outcome is still that Trump quietly puts a stop to all the investigation and cuts a deal with Powell to quit immediately. It looks like the path of least resistance for everyone.
1. There are 12 voting slots on the FOMC. All 7 governors have a permanent vote on the FOMC. 11 of the 12 presidents of the regional FRBs rotate on a schedule into and out of 4 voting slots. Only the NY Fed president has a permanent vote on the FOMC (that person is also always the Vice Chair). So Powell gets to vote at every meeting that he is part of.
2. Yes, all changes to monetary policies, including the size and composition of the balance sheet, are voted on. Sometimes there are dissents. For example, at the March 2025 meeting, Waller dissented from the FOMC’s decision to slow QT. He’d wanted to maintain the pace of QT. But Powell said today that he would support the new chair where he could, out of respect for the chair. So he might not vote against a balance sheet reduction, if he even sticks around long enough, which I doubt.
3. That’s sort of my guess.
Ah right. The 7 governors always get to vote. Silly me.
The one good which may come out of Powell hanging around for a few months more is that Miran will be put out of this misery. He has been a joke in his short term so far, bringing disrepute to the governorship with his clear sycophancy to Trump. Waller also dissented to please Trump when he was in the running for chair but he did it in a sort of dignified way. Miran is clearly not cut out for this role and the fact that Trump chose Warsh over Hassett makes me feel that he also understands the importance of a FOMC who at least sound respectable.
Powell made horrible mistakes as a chair but he still managed to maintain this perception of Fed independence. Miran in his role as governor can’t even do that.
The fed is in a damned if they raise rates, damned if they don’t situation. This administration is doing more damage than the fed has tools to handle it.