Fed holds rates steady amid dissent

An unusually divided Federal Reserve on Wednesday held its key interest rate steady as policymakers grappled with the policy impact of persistent inflation and awaited a looming leadership transition at the central bank.

In what may have been Chair Jerome Powell‘s final meeting at the helm, the rate-setting Federal Open Market Committee voted to hold the benchmark funds rate in a range between 3.5%-3.75%. Markets had been pricing in a 100% chance of no change.

However, the meeting saw a dramatic turn amid a groundswell of officials who opposed messaging that further rate cuts could be ahead.

Amid expectations for a routine vote to hold the benchmark funds rate steady, the Federal Open Market Committee instead was split along 8-4 lines, with officials expressing different reasons for their vote.

The last time four FOMC members dissented was in October 1992.

Governor Stephen Miran, as he has done since joining the central bank in September 2025, dissented in favor of a quarter percentage point cut.

The other three “no” votes came from regional presidents Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas. They said they agreed with the hold but “did not support the inclusion of an easing bias in the statement at this time.”

At issue for the trio was this sentence: “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 phrasing indicates the likelihood that the next move would be lower, implied by using the word “additional,” which reflects that the most recent rate actions have been to cut. Hammack, Kashkari and Logan, along with several other Fed officials, have warned about the dangers of persistent inflation. Higher prices augur higher rates for the Fed, which has been on an easing bias since the latter part of 2025.

In the post-meeting statement, the committee noted that, “Inflation is elevated, in part reflecting the recent increase in global energy prices.”

Markets had been widely expecting the hold and in fact are pricing in no changes the rest of this year and well into 2027. Fed officials at the March meeting indicated they foresee one cut this year then another in 2027, putting the funds rate down to its expected “neutral” level around 3.1%.

The decision marked the third consecutive meeting where the committee chose to stand pat – following three consecutive cuts last year.

For most of his eight years as chair, Powell has been able to maintain strong consensus among the committee even as the Fed has struggled to contain inflation and resist aggressive White House political pressure.

Policymakers, though, face an economic climate where inflation indeed has held well above the Fed’s 2% target, as Trump’s tariffs and soaring energy prices are complicating policy. Normally, Fed officials would look through the temporary price shocks from both factors, but the…