The FOMC delivers a hawkish warning shot
The bigger surprise came in the number of dissents, with four members of the committee voting against guidance in the policy statement. Three of those were hawkish, suggesting that the FOMC should remove its easing bias. This could be explained as a response to the current energy price shock, but to
The FOMC voted to maintain the range of the federal funds rate at 3.50-3.75% at the April policy meeting, as had been widely anticipated.
The bigger surprise came in the number of dissents, with four members of the committee voting against guidance in the policy statement. Three of those were hawkish, suggesting that the FOMC should remove its easing bias. This could be explained as a response to the current energy price shock, but to us, it looks more like a signal to the incoming Fed Chair regarding the FOMC’s independence.
While unexpected, we are inclined to see that as a dollar-positive development.
The all-important context here is this: April was probably Jerome Powell’s final meeting as Fed Chair. Whether or not Powell remains on the Committee as a governor is another question, albeit not one which he was willing to offer much insight on today, despite being repeatedly probed on the topic. Chair Powell’s replacement, Kevin Warsh, is seen as likely to take a more dovish policy approach.
With that in mind, we are inclined to see the hawkish tilt in this latest set of communications as an effort to assert the independence of the Committee against a new Fed Chief, and a President, who would like to see rates reduced.
Underscoring just how unusual opposition of such magnitude is, the last time the FOMC saw four dissents came in 1992. On this occasion, a vote for cutting rates by Miran was a given ahead of the event. But Hammack, Kashkari, and Logan all voted against the majority too, albeit hawkishly, suggesting that they “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”.
Aside from the vote split, there was little else of note for markets. Chair Powell’s press conference largely centred on his replacement, offering little red meat for traders. The net result then was a modest hawkish tilt, in keeping with Committee voting, enough to see the dollar tick a little higher, but this was an otherwise uninformative occasion. We strongly suspect that the June meeting will prove somewhat more interesting.