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Apr. 29, 2026 02:00PM PST
The Fed held its benchmark interest rate at 3.5 to 3.75 percent, pointing to uncertainty about how rising energy prices will impact inflation.
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The US Federal Reserve held its third meeting of 2026 from Tuesday (April 28) to Wednesday (April 29) as elevated energy prices sparked a resurgence in inflation concerns.
As overwhelmingly expected, the central bank held the federal funds rate steady in the 3.5 to 3.75 percent range.
The Fed is maintaining a “wait-and-see” approach to interest rates after three consecutive cuts at the end of 2025. The decision was no surprise to analysts concerned with the economic impact of the Iran war.
The prospect of at least one rate cut in late 2026 is now out the window as CME Group's (NASDAQ:CME) FedWatch tool shows market participants believe rates will stay higher for longer on the persistent threat of sticky inflation.
With oil prices surging and US economic data trending downward, there’s also the possibility that the US economy could be on track to enter a period of stagflation — a dangerous mix of stagnant growth and high inflation. Such conditions would negate any room for the Fed to consider embarking on a new easing cycle.
Tasked with both maximizing employment and maintaining stable prices, the Fed faces a significant challenge if its monetary policy levers prove ineffective for managing economic conditions.
For several sessions now, the Fed's board of governors has been split between those who want to lower rates to juice the economy, and those who see the necessity of higher rates for longer.
Getting deeper into 2026, the economic data is favoring a hawkish hold stance from the Fed.
On April 9, the US Bureau of Labor Statistics released personal consumption expenditures price index data, the Fed’s preferred inflation metric, which showed an increase of 2.8 percent for February. Consumer price index data came the following day and indicated that headline inflation for March was up 3.3 percent over the last 12 months.
The danger is these numbers may rise higher in the months ahead if the conflict in the Middle East continues to impact energy and fertilizer prices. Both directly influence a vast range of consumer goods and food products.
Meanwhile, Bureau of Labor Statistics data shows that the US economy picked up 178,000 jobs in March compared to a decrease of 92,000 jobs in the previous month. That’s attributed to the halt to strikes in the healthcare sector, as well as to gains in construction, transportation and warehousing.
The unemployment rate is now at 4.3 percent, down 0.1 percent from the previous month.
However, there are other signs the labor market may be in what analysts are calling a “low hire, low fire” environment. Namely, wage growth for March came in at 3.5 percent year-on-year, its slowest annual pace since 2001. In addition, labor force participation for the month fell to 61.9 percent, its lowest level since late 2021.
Historic dissent at the Fed
The split between doves and hawks that began in late 2025 is still plaguing the Fed. This time, the Federal Open Market Committee was split eight to four, its deepest divide since October 1992.
As per his usual vote, Governor Stephen Miran cast a dissenting vote in favor of a 0.25 percent cut.
The other three dissenting members were regional presidents Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas. Each took issue with this phrasing in the Fed statement: “In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”
The trio strongly believes persistent inflation is still a threat, and that any phrasing implying near future rate cuts are still on the table should not be included.
Powell's last presser as Fed chair
Jerome Powell’s term as chair of the Fed expires in May of this year. US President Donald Trump has criticized the Fed, and Powell in particular, saying he hasn't lowered rates quickly enough. Powell has even faced a criminal investigation initiated by the US Department of Justice under the Trump administration.
During his last press conference as Fed chair, Powell declared his intention to remain a board governor once his term as chair ends, making a point to criticize the White House’s attempts to undermine Fed independence:
“These legal actions by the administration are unprecedented in our 113-year history, and there are ongoing threats of additional such actions. I worry that these attacks are battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policy without taking into consideration political factors.”
On January 30, Trump nominated Kevin Warsh, a former Fed governor, to replace Powell as the next Fed chair. Considered more of a hawk, he may not be as quick to lower interest rates as Trump would like.
Warsh's nomination advanced from the Senate Banking Committee on Wednesday morning, and Powell was asked about his level of confidence in Warsh’s commitment to not letting political pressure undermine the Fed's mission.
“So he testified very strongly to that effect in his hearing, and I’ll take him at his word,” he replied.
Gold, silver prices react to Fed decision
The gold price dropped to US$4,522.18 per ounce after the Fed's decision.
Silver also fell to US$70.99 per ounce. The precious metals are under pressure from the biggest energy supply shock on record and profit taking as investors seek to unlock liquidity.
Equities reactions were mixed following the rate announcement on Wednesday, with the S&P 500 (INDEXSP:INX) down 0.17 percent to reach 7127. Meanwhile, the Nasdaq-100 (INDEXNASDAQ:NDX) gained 0.43 percent to come in at 27,153.42, and the Dow Jones Industrial Average (INDEXDJX:DJI) was down 0.65 percent, coming to 48,820.36.
The next Fed rate decision will come on June 17, the first meeting after Powell’s term as chair comes to an end.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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Melissa Pistilli has been reporting on the markets and educating investors since 2006. She has covered a wide variety of industries in the investment space including mining, cannabis, tech and pharmaceuticals. She helps to educate investors about opportunities in a variety of growth markets. Melissa holds a bachelor's degree in English education as well as a master's degree in the teaching of writing, both from Humboldt State University, California.
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Melissa Pistilli has been reporting on the markets and educating investors since 2006. She has covered a wide variety of industries in the investment space including mining, cannabis, tech and pharmaceuticals. She helps to educate investors about opportunities in a variety of growth markets. Melissa holds a bachelor's degree in English education as well as a master's degree in the teaching of writing, both from Humboldt State University, California.
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