“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?
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.
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.
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.
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)
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.
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?
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.
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.
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.😁