The Federal Open Market Committee held the federal funds target range unchanged at 3.50%-3.75% on Wednesday, an outcome that drew unanimous support from voting members and matched the 99.9% probability priced into Polymarket and overnight-index swaps. The decision marked Jerome Powell's final FOMC announcement before his term as chair expires May 15, capping an eight-year tenure that included the post-pandemic inflation surge and the 2026 Iran-conflict shock.
In a notable shift of language, the FOMC statement removed its long-standing reference to inflation being "somewhat elevated" and replaced it with "two-sided risks to the dual mandate." The committee acknowledged that headline CPI accelerated to 3.3% in March, up from 2.4% in February, while signaling that softening payroll momentum and a 4.1% unemployment rate are placing equal weight on the employment side.
Powell's Farewell Tone
In his 2:30 p.m. ET press conference, Powell spoke for nearly 45 minutes, defending the FOMC's gradualist approach over the past 18 months. "We have been deliberate, data-dependent, and transparent through an extraordinary period," he said. He repeatedly declined to characterize the next move as a hike or a cut, calling it "genuinely contingent" on whether oil-price pass-through into core services accelerates further. Pressed on the timing of his successor, Powell deferred to the White House.
The S&P 500 swung between gains and losses during the press conference before settling 0.4% higher at 7,202. The 10-year Treasury yield closed up 3 basis points at 4.37%, while the two-year jumped 6 basis points to 4.13%. The dollar index strengthened 0.3% to 101.9, with EUR/USD slipping to 1.063 and USD/JPY pushing to 159.78.
Dot-Plot Drift Hawkish
The updated Summary of Economic Projections showed the median 2026 fed-funds dot at 3.625%, implying zero cuts the rest of the year — up from 3.375% in March, which had implied one 25 basis-point cut. The 2027 median moved to 3.125% from 2.875%. The longer-run neutral rate ticked up to 3.0% from 2.875%, the highest level on record. Core PCE inflation forecasts were lifted to 3.0% for 2026 (from 2.6%) and 2.4% for 2027 (from 2.2%).
Outlook
Markets now imply just 4 basis points of cumulative easing through year-end, down from 8 basis points before the meeting. JPMorgan's Michael Feroli noted that "the path of least resistance is patience — the FOMC has effectively put the rate-cut conversation on ice until the geopolitical situation clarifies." The next FOMC meeting is June 16-17, by which point a new chair will have presided over their first decision. Bessent-installed chair odds remain led by Kevin Warsh at 31% and Christopher Waller at 24% on PredictIt.