Federal Reserve price determination: No change to Fed funds, as anticipated

• Vote was 10-2 with Waller and Miran voting for cuts
• Prior Fed funds target range was 3.50-3.75%
• Statement saw growth at a ‘solid pace’ vs ‘moderate pace’ previously
• Statement sees inflation as ‘somewhat elevated’, same as before
• Says unemployment rate has shown some signs of stabilization vs ‘edged up’ previously

Looking back to 2025, December’s meeting was contentious – three dissents marked a rare two-sided split. Fed Governor Miran wanted a 50bp cut while Presidents Schmid and Goolsbee argued for no move at all, reflecting deep disagreement about whether policy is sufficiently restrictive.

This meeting sees the change in voting ranks with Goolsbee, Collins, Schmid and Musalem out and replaced by Logan, Kashkari, Hammack and Paulson. Logan was seen as the most-likely to make a hawkish dissent but she didn’t, instead it was Waller and Miran (no surprise) calling for a cut. Notably, Miran called for 25 bps this time vs 50 bps last time. Waller is undoubtedly making a last-ditch effort for the Fed chair job, which could be announced any time.

The December statement’s language about inflation making progress toward the 2% target was also removed, signaling the Fed’s growing unease about stalled disinflation.

Recent data shows core PCE running at 2.8%, well above target and higher than 2.7% expected. The labor market has proven resilient with unemployment hovering near 4% however this week’s consumer confidence report hit an 11-year low.

Trump’s return to the White House has complicated the picture. The president has backed tariffs and demanded immediate rate cuts, creating political pressure Powell will need to navigate carefully. Trump’s DOJ also subpeonaed Powell and that led to a rare Sunday statement from the Fed chair.

Markets had priced in virtually zero chance of a cut today, with June now the earliest anticipated move.
Powell warned that reducing restraint too fast could hinder inflation progress, cementing the higher-for-longer narrative that’s dominated positioning in recent weeks.

Full text:

Available indicators suggest that economic activity has been
expanding at a solid pace. Job gains have remained low, and the
unemployment rate has shown some signs of stabilization. Inflation
remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at
the rate of 2 percent over the longer run. Uncertainty about the
economic outlook remains elevated. 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 3‑1/2 to 3‑3/4 percent. 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 Committee is strongly committed to supporting maximum employment and
returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee
will continue to monitor the implications of incoming information for
the economic outlook. The Committee would be prepared to adjust the
stance of monetary policy as appropriate if risks emerge that could
impede the attainment of the Committee’s goals. The Committee’s
assessments will take into account a wide range of information,
including readings on labor market conditions, inflation pressures and
inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair;
John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa
D. Cook; Beth M. Hammack; Philip N. Jefferson; Neel Kashkari; Lorie K.
Logan; and Anna Paulson. Voting against this action were Stephen I.
Miran and Christopher J. Waller, who preferred to lower the target range
for the federal funds rate by 1/4 percentage point at this meeting.