Fed Policymakers Suggest Rates May Need to Rise

A majority of Fed officials highlighted that some policy firming would likely become appropriate if inflation were to continue to run persistently above 2%, minutes from the FOMC meeting in April 2026 showed. To address the possibility of rate hikes, "many participants indicated that they would have preferred removing the language from the post-meeting statement that suggested an easing bias regarding the likely direction of the Committee’s future interest rate decisions“. However, several participants highlighted that it would likely be appropriate to lower interest rates once there are clear indications that disinflation is firmly back on track or if solid signs emerge of greater weakness in the labor market. The Fed kept the fed funds rate unchanged at the 3.5%–3.75% target range for a third consecutive meeting in April. The decision was not unanimous, and the 8-4 vote marked the first time since October 1992 that four officials dissented against a FOMC decision.

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.