The Federal Reserve held the benchmark federal funds rate at 3.50-3.75% on Wednesday, in what is widely expected to be Chair Jerome Powell‘s final policy decision before passing leadership to Kevin Warsh on May 15.

Governor Stephen Miran again dissented in favor of a quarter-point cut.

The Fed flagged that “inflation is elevated, in part reflecting the recent increase in global energy prices,” marking a hawkish turn from the previous “somewhat elevated.”

The Committee also stressed that “developments in the Middle East are contributing to a high level of uncertainty about the economic outlook.”

Notably, three members — Beth M. Hammack, Neel Kashkari, and Lorie K. Logan — backed holding rates but opposed adding any easing bias to the statement at this stage.

Powell's farewell press conference is set for 2:30 p.m. ET, where investors will be watching closely for any final signal on the rate path before the policy baton changes hands.

Market Reactions

Traders repriced the rate path in a more hawkish direction. Fed funds futures have nearly erased expectations for cuts this year and now imply about a 25% probability of a 25-basis-point hike by April 2027.

The S&P 500 — as tracked by the SPDR S&P 500 ETF Trust ( SPY ) — was down 0.3% at 2:20 p.m. ET, extending session lows in the wake of the Fed statement.

WTI crude — as tracked by the United States Oil Fund ( USO ) — surged more than 7% to $107, as persistent Middle East tensions kept risk premia elevated.

Interest Rate Probabilities Based On Fed Futures