US Fed Keeps Policy Rates Unchanged In Powell’s Last Meeting as Chief

The Federal Reserve, the United States central bank, decided to keep its policy rate unchanged in the 3.5–3.75 percent range even as four of the 12 members dissented.

While three members dissented against the Fed still keeping a bias towards lowering borrowing costs in the future, one member dissented in favour of cutting the policy rate by 25 basis points.

This was the most divided policy meeting of the Fed since 1992, reflecting the uncertainty brought to the economy due to the war in West Asia, which completed two months just a day before the meeting.

“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 3-1/4 to 3-3/4 percent,” the Federal Open Market Committee said in a statement.

Crude oil prices have surged past the $120 per barrel mark, reaching their three-year high levels. High energy prices have pressured inflation numbers across economies, including the United States.

It is unlikely that the Fed may cut rates in the near future even if energy supply disruptions subside. Much of the Fed’s next move will also depend on the incoming Fed chief, Kevin Warsh.

It will be keenly observed how he handles pressure from President Donald Trump, who has criticised Jerome Powell for not easing policy rates at the pace he would have expected.

In his probable last speech as the Fed chief, Powell raised the issue of political pressure faced by the central bank, stating that the institution’s independence was at risk.

Powell said that after his chairmanship concludes on May 15, he will remain on the Fed board, acting as a central bank governor.

Powell said that he will stay on the Fed because of the legal actions taken against him.

The US Department of Justice (DOJ) dropped a criminal investigation into Powell regarding the renovation of the central bank headquarters.

A US judge, however, previously quashed subpoenas related to this investigation, citing “essentially zero evidence” and an “improper purpose” of harassment.