FOMC Recap: Powell to STAY on the Fed Board - What Traders Need to Know

FOMC Meeting Key Points

• The Federal Reserve’s FOMC kept interest rates unchanged in the 3.50-3.75% range, as expected, in a divided 8-4 vote.
• Powell’s decision to remain on the FOMC board preserves its independence and could lead to higher interest rates in the near term.
• EUR/USD is on the verge of falling to its lowest level in 3 weeks under 1.1670, key support at 1.1600

FOMC Interest Rate Decision

The Federal Reserve’s FOMC kept interest rates unchanged in the 3.50-3.75% range, as expected.

Trump appointee Stephen Miran was dissented in favor of a 25bp rate cut, and Neel Kashkari, Lorie Logan, and Beth Hammack dissented against the inclusion of an easing bias in the statement.

There were no other changes to monetary policy at today’s meeting.

FOMC Monetary Policy Statement

In its accompanying monetary policy statement, the FOMC minor “mark-to-market” changes to its monetary policy statement, including acknowledging the “recent increase in global energy prices” and “[d]evelopments in the Middle East” explicitly.

The three dissents against the “inclusion of an easing bias in the statement at this time” theoretically refer to the continued usage of the line “the extent and timing of additional adjustments to the target range for the federal funds rate,” an objectively neutral statement from the layman’s perspective:

Source: FOMC, StoneX

In any event, the dissents reinforce the idea that monetary policy decisions are made by a committee with a diverse range of views, emphasizing the difficult position that incoming Fed Chairman Kevin Warsh faces.

FOMC Chairman Jerome Powell’s Press Conference

Jerome Powell started off his press conference with a bang, almost immediately announcing that he would stay on the FOMC board “for a period of time” after his tenure as Chairman concluded. This marks the first time a Chairman has NOT immediately retired from the board since 1948 (Marriner Eccles in a pushback against government interference).

Highlights from his comments follow [emphasis mine]:

POWELL: WILL STAY ON AS GOVERNOR "FOR A PERIOD OF TIME" AFTER MAY 15

POWELL: I PLAN TO KEEP A LOW PROFILE AS A GOVERNOR

POWELL: I WORRY THESE ATTACKS ARE BATTERING THE INSTITUTION

POWELL: I THINK FED INDEPENDENCE IS AT RISK

POWELL: I WOULD NEVER BE A SHADOW CHAIR

POWELL: WILL LEAVE FED WHEN I THINK IT'S APPROPRIATE TO DO SO

POWELL: WE EXPECT TARIFF INFLATION TO RECEDE NEXT TWO QUARTERS

POWELL: ENERGY SURGE HASN'T EVEN PEAKED YET

POWELL: WE WILL WANT TO SEE THE BACKSIDE OF BOTH THE ENERGY AND TARIFF SHOCKS BEFORE EVEN CONSIDERING RATE CUTS

POWELL: WHAT HAPPENS IN NEXT 30-60 DAYS COULD CHANGE THINGS

POWELL: PEOPLE NOT SAYING WE NEED TO HIKE NOW

POWELL: RATE GUIDANCE LANGUAGE IS GOOD DISCUSSION TO BE HAVING

POWELL: IF WE NEED TO HIKE WE WILL SIGNAL AND DO

POWELL: IF THIS GOES ON FOR MUCH LONGER WILL FEEL IT MUCH MORE

POWELL: DON'T SEE CASE FOR MEANINGFULLY RESTRICTIVE POLICY

POWELL: EVERY SUPPLY SHOCK CAN DRIVE UP INFLATION, UNEMPLOYMENT

POWELL: TAKE WARSH AT HIS WORD THAT HE'LL STAND UP TO TRUMP

POWELL: DOESN'T FEEL LIKE GOOD MARKET FOR THOSE WITHOUT JOBS

Overall, Powell’s final press conference as FOMC Chairman will be remembered for his defense of the Federal Reserve’s independence, first and foremost. For traders, the implications are that interest rates will likely be higher for longer than expected when we woke up this morning, a realization that is boosting treasury yields and the US dollar and weighing on equity markets as we go to press.

US Dollar Technical Analysis: EUR/USD 4-Hour Chart

Source: Tradingview, StoneX

Looking at the chart of the world’s most widely-traded currency pair, EUR/USD is on the verge of falling to its lowest level in 3 weeks under 1.1670 as traders digest the FOMC meeting. From a technical perspective, a break below that support would expose the 50% and 61.8% Fibonacci retracements near 1.1650 and 1.1600 respectively.

A bounce from this level would still leave the near-term bearish bias intact below this week’s high near 1.1750.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX