Fed Split on Need for Rate Cuts: Minutes

The Fed kept the federal funds rate unchanged at the 3.5%–3.75% target range for a third consecutive meeting in April 2026, in line with expectations. The decision was not unanimous, with Governor Miran voting to lower interest rates by 25bps and three other members objecting the language in the statement that suggested the central bank would eventually resume cutting rates. The 8-4 vote marked the first time since October 1992 that four officials dissented against a FOMC decision. The central bank reiterated that it will carefully assess incoming data, the evolving outlook, and the balance of risks in determining the appropriate stance of monetary policy, and stands ready to adjust policy as needed if risks emerge that could hinder the achievement of its objectives. In addition, the Fed noted that developments in the Middle East are contributing to a high level of uncertainty about the economic outlook. Meanwhile, Powell said he will remain Fed governor after his Chair term ends.

The Fed is widely expected to keep the federal funds rate unchanged at the 3.5%–3.75% target range for a third consecutive meeting in April 2026, as policymakers navigate an increasingly complex environment. The outlook for the rest of the year remains uncertain, with oil prices continuing to rise and inflation picking up due to the energy shock, even as labour market and broader economic indicators remain resilient. Investors will also closely watch policymakers’ assessment of the economic outlook and their guidance on the policy path ahead, particularly whether a rate hike could still be considered, although markets currently expect no changes to rates this year. This meeting could also mark the final one under Fed Chair Powell. The Justice Department said it would halt its criminal investigation into Powell, removing a key obstacle to the Senate’s confirmation of his nominated successor, Kevin Warsh, whose appointment is set for May 15.

Some Fed officials favoured a two-sided framing of future rate decisions, highlighting that additional increases could be warranted if inflation persists above target levels, minutes from the last FOMC meeting in March showed. The vast majority of participants judged that upside risks to inflation and downside risks to employment were elevated, and the majority of participants noted that these risks had increased with developments in the Middle East. A prolonged conflict in the Middle East would likely lead to more persistent increases in energy prices and these higher input costs would be more likely to pass through to core inflation. The Fed left the federal funds rate steady at the 3.5%–3.75% target range for a 2nd consecutive meeting in March 2026, in line with expectations. However, policymakers still signaled one reduction in the fed funds rate this year and another in 2027, though the timing remains unclear.