The Federal Reserve decided to maintain its benchmark interest rate at a target range of 3.5% to 3.75% on Wednesday, continuing a cautious approach following what is expected to be Jerome Powell’s final FOMC meeting as chair. This marks the third instance this year that the committee has halted policy changes due to uncertainties caused by Middle East tensions.
“The developments in the Middle East are adding to the uncertainty surrounding the economic outlook,” stated the Fed in their announcement.
As anticipated, the Fed’s decision had little impact on market expectations for monetary policy adjustments. Concurrently, Bitcoin and Ethereum saw price reductions around $75,100 and $2,240 respectively, with both cryptocurrencies experiencing accelerated losses over the past day, as reported by CoinGecko. In the last 24 hours, Bitcoin declined by 1.4%, while Ethereum decreased by 2.3%.
Earlier Wednesday, Kevin Warsh’s nomination to succeed Powell advanced through a procedural vote in the Senate Banking Committee, now heading to the full Senate where Republicans hold sway. If Warsh is not confirmed by May 15, Powell will act as “chair pro tempore” until an orderly transition can occur, and he might continue serving as a Fed governor for institutional continuity.
The Justice Department concluded its investigation into Powell last week following threats from Sen. Thom Tillis (R-NC) to block Warsh’s nomination vote unless the inquiry was resolved. This case had been dismissed by Tillis as “bogus.” It was revealed that Warsh, a millionaire with $100 million net worth, holds investments in crypto sectors like Solana and Polymarket, despite his criticism of many crypto projects while supporting Bitcoin.
During the FOMC meeting, Fed Governor Stephen Miran advocated for a 25 basis-point rate cut, echoing his previous stance. Three Fed governors agreed to keep rates unchanged but did not back the language suggesting an easing bias.
Lower interest rates typically benefit risk assets such as stocks and cryptocurrencies due to cheaper borrowing costs and enhanced liquidity. However, traders do not anticipate immediate monetary loosening, with CMEFedWatch projecting stable rates through December.
With continued challenges in shipping through the Strait of Hormuz—a crucial oil passage for 20% of global supply—U.S. energy prices have surged, complicating the Fed’s aim to curb inflation to its 2% target. On Wednesday, the national average gas price reached $4.22 per gallon, a 6.2% increase over the past month as reported by AAA, up from around $2.99 when U.S.-Israel tensions with Iran began.