US Federal Reserve Maintains Interest Rate at 3.5-3.75%, Unanimous Vote Despite Divided Committee on Inflation Outlook

Federal Reserve Maintains Interest Rate, But Deepening Divisions Among Policymakers Raise Concerns

The Federal Reserve kept its benchmark interest rate unchanged at 3.5-3.75 percent on Wednesday, but the decision came in a sharply divided 8-4 vote. This marked the highest number of dissents since 1992, highlighting the deepening differences among policymakers at what is likely Jerome Powell's final meeting as chair.

In its statement, the Federal Open Market Committee (FOMC) noted that inflation remains "elevated", revising its earlier description of "somewhat elevated", and cited a recent rise in global energy prices as a key factor. The central bank also flagged that the ongoing US-Iran conflict is contributing to a "high level of uncertainty" around the economic outlook.

Job gains have remained modest on average, while the unemployment rate has been largely unchanged, reflecting a mixed economic backdrop even as price pressures persist. The decision to hold rates steady at the current 3.5-3.75 percent range was widely expected, but the scale of dissent marked a notable shift.

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The last time the Fed saw four dissents was in October 1992, underscoring the unusual level of disagreement within the committee. Despite the divergence, the central bank retained its guidance that it will "carefully assess incoming data, the evolving outlook, and the balance of risks" when considering the extent and timing of any future policy adjustments.

Market reaction was cautious, with the S&P 500 slipping around 0.3 percent in the minutes following the announcement, while the Nasdaq Composite also edged lower. Meanwhile, crude oil surged sharply, with Brent crude jumping more than 7 percent to fresh highs since the onset of the US-Israel conflict with Iran. This is widely expected to add to inflation concerns and complicate the Fed's policy outlook.

The meeting also comes amid a potential leadership transition at the Fed. Powell's term is set to end on May 15. Meanwhile, US President Donald Trump's nominee, Kevin Warsh, has cleared a key procedural hurdle in the Senate, with a full confirmation vote expected in the coming weeks.

The market is expecting the Fed to remain on hold for the next few months, with a Reuters poll indicating that rate cuts may not materialise until later in the year, as inflation continues to stay above comfort levels.

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