The Fed held rates. But there were "four" dissents.

At its April 29 FOMC meeting, the Fed kept the fed funds target range at 3.50–3.75%. It was a third straight hold after January and March. The focus was the vote, where dissents reached four in an 8-to-4 split. That was the most since 1992, reflecting deepening divisions within the committee.

The dissents came from two directions. One member dissented in favor of a rate cut, while three objected to the "easing bias (cuts ahead)" language remaining in the statement. With prices re-accelerating on higher energy costs tied to Middle East tensions (the Iran war that began in late February), opinions split over "whether the door to a cut should be left open." Chair Powell, while noting that the tariff-driven boost to prices might be "one-off," maintained a stance of not rushing to cut.

The Fed hiked at a record pace from 2022, and the fed funds rate peaked in July 2023 at 5.25–5.50% (midpoint 5.375%). It then began cutting from September 2024, and a December 2025 cut brought it to 3.50–3.75%. Since then, with inflation re-igniting, the Fed has paused rate cuts and held steady.

The last cut was in December 2025. Since then, the picture has been a textbook case of "higher for longer." The rate cuts markets had initially expected for 2026 have been pushed back in the face of higher energy prices and tariff-driven upside to inflation.

March CPI (consumer prices) jumped to +3.3% year on year, a sharp rise from +2.4% in February. Behind it is the Iran war that began in late February. Energy prices surged +10.9% year on year and gasoline +21.2%, accounting for about three-quarters of the rise in prices. Combined with tariff factors, the trend of slowing inflation is going into reverse.

Core CPI excluding energy is also at +2.6%, still above the 2% target. Meanwhile the labor market remains resilient, leading the Fed to conclude there is "no reason to rush a rate cut." How far high prices spread beyond energy — this is the one point the Fed is watching closely.

At four meetings a year, FOMC members mark their view of the appropriate future rate with dots — the dot plot — alongside economic projections (SEP). There was no release at the April meeting; the most recent is from March 2026. Its median pointed to one more cut (25bp) this year. After prices re-accelerated, a downward revision at the next, June meeting (a retreat in the rate-cut outlook) is in focus.

The March median (3.4% at year-end) implied one cut this year from the then-prevailing 3.50–3.75%. But subsequent upside in prices has eroded the market's rate-cut expectations. If the June SEP dots shift toward "zero cuts this year," the end of the easing cycle would become clear.

Monetary policy is set at the FOMC (Federal Open Market Committee), which meets eight times a year. Twelve people hold votes — the seven Governors in Washington, the President of the New York Fed (permanent), and four of the remaining eleven regional Fed presidents on a rotating basis. This time, four of them dissented.

Because of this transparency, as many as four dissents sends a powerful message. Dissents in both directions — "one leaning toward a cut" and "three objecting to language signaling cuts" — show a committee split over the outlook for inflation. The decision is announced at 2:00 p.m. U.S. Eastern Time, with Chair Powell's press conference 30 minutes later.

The FOMC meets eight times a year, and the March, June, September and December meetings publish economic projections (SEP) and the dot plot. With this meeting (Apr 29) now done, the next is June 16-17.

The market is trying to gauge, at the June meeting and beyond, whether inflation stays high or eases on energy prices and tariffs. The June meeting will publish a new SEP (dot plot), and whether the rate-cut outlook retreats further is the biggest focus.

The dollar is the world's reserve currency. Fed rates move currencies, bonds and stocks worldwide. As long as U.S. rates stay high, a backdrop of a stronger dollar and weaker yen tends to persist, an important driver of dollar-yen. After this hawkish hold, U.S. long-term yields came under upward pressure.