April 29, 2026 FOMC Meeting Analysis

Hey everyone, I’m Caroline Casavant. Thank you for tuning in to the April FOMC Update.

In this brief update, I want to first walk you through what happened at today’s FOMC meeting. Second, take a step back and think about the economic and market context in which today’s meeting occurred. Third, give you a quick update on the composition of the FOMC, and fourth, talk about market pricing and what it means for your balance sheet.

As was widely expected, the FOMC kept the target range unchanged at 3.5 to 3.75% today.

We had no summary of economic projections and no major changes to the statement language.

The modest tweaks that we did get were an acknowledgment that the ongoing conflict in the Middle East is a source of inflation and also a source of material economic uncertainty in the U.S.

Most notably, we had four dissents in the FOMC statement.

One of those was Governor Myron, who wanted to cut the target range by 25 basis points today.

The other three were Hammock, Kashkari, and Logan, all of whom wanted to tweak the statement language, which in its present form has been interpreted by the market as suggesting that the next action by the FOMC is more likely to be a cut than a hike.

It’s pretty unusual to get four descents.

In fact, we haven’t had that many descents in the last 30 years.

So let’s take a turn to thinking about the economic context in you’re getting that kind of communication.

Since the March FOMC we saw strong data in the labor market that suggests you’ve seen continued stabilization in the labor market, but you’ve also seen inflation data that is much higher than target.

Chair Powell told us today that the best estimate for the March PCE and core PCE data are 3.5 and 3.2% respectively.

Remember that March CPI data printed at 3.3% annualized.

A lot of that increase was due to an 11% increase in energy costs month over month, but not all of it.

So if you look under the hood, what you saw was disinflation in services and in food, which is certainly welcome, but you saw continued inflation trending upwards in some important sectors like shelter.

What that suggests is that not all of the inflation is due to the ongoing crisis in the Middle East, and we still haven’t actually seen all of that inflation flow through to the real economy.

In fact, rent-crewed futures are actually higher at this point than they were at the time of the March FOMC.

If you turn to markets, what we’ve seen over the period is a decline in interest rate volatility and no major moves in treasury yield pricing.

So the two-year and the 10-year have been relatively stable over this time, as has the looks of steepness.

And what you’re really continuing to see is market pricing of no cuts or no hikes for the rest of this year, but continued elevated interest rates going forward.

Let’s turn to the composition of the committee.

So today was Chair Powell’s last FOMC meeting as chair.

His term as chair expires on May 15th.

The other important thing that happened today is that Warsh was voted through by the Senate Banking Committee, which clears the floor for a vote on his overall candidacy for chair in the coming weeks.

He’s widely expected to be confirmed before the FOMC’s June meeting.

One thing that’s a bit unusual is that Chair Powell indicated that he’s decided to stay on as a governor for the foreseeable future.

It’s a bit unusual because traditionally, when a chair’s term expires, the chair leaves the committee, but Chair Powell indicated that he plans to stay on as a result of the ongoing potentially open DOJ investigation into the Fed.

While this has really important implications for thinking about the relationship between the Fed and the Treasury and the executive branch, I think the key message for today is that it probably doesn’t have material implications for the near-term path of policy.

Remember that there are 19 people on the FOMC and Chair Powell will be one of them, and there’s no indication that his are materially out of consensus at this point.

So while it’s an important development politically, it’s not obvious that it’s going to matter a lot for interest rates going forward.

Let’s turn to market pricing.

Treasury yields moved up a bit today, particularly at the front end of the curve, and the curve continued to flatten a little bit.

The market is pricing no change in the target range through the end of this year, and no material change to the first half of 2027.

Though if anything, the bias is towards rates moving a bit higher at that time than lower.

What that means for your balance sheet is that you should be thinking about your liabilities and how you’re sourcing them.

And make sure that your balance sheet is well positioned for the distribution of rates that’s priced into the market.

Remember that a few months ago, we had a higher conviction view that we were going to get some cuts this year.

And the committee was strongly signaling that the next step for the FOMC was more likely to be cuts than hikes.

That no longer seems to be the case.

You’re seeing in the dissent and also in the communication from the chair that the committee is increasingly moving towards a more neutral or balanced stance.

So make sure that your balance sheet is positioned for those potential changes. Thank you.