At its April 2026 meeting held on April 29, Eastern Time, the Federal Reserve once again maintained the federal funds rate within the target range of 3.50% to 3.75%. A key change in the policy statement was the characterization of U.S. inflation, which was revised upward from "somewhat elevated" to "increasing, partly reflecting recent rises in global energy prices," directly acknowledging the upward pressure on crude oil prices stemming from the Middle East. The description of the policy outlook remained accommodative.
The meeting's outcome saw four voting members express dissent. One member argued for a 25 basis point rate cut, while three others agreed with pausing policy adjustments but opposed maintaining an accommodative outlook, believing it unnecessary amid rising inflationary pressures. The overall tone of the Fed's meeting was perceived as slightly hawkish, leading to declines in the S&P 500 and Dow Jones indices overnight, alongside an increase in U.S. Treasury yields.
During the post-meeting press conference, Fed Chair Powell stated that monetary policy is not on a preset course but will involve independent decisions made at each meeting based on the most complete information available. The rise in the number of dissenting votes drew market attention. However, facing dual supply shocks—tariff-driven goods inflation and energy-driven overall inflation—some members have adopted a more hawkish stance. Powell, however, maintained that tariff impacts would likely manifest as one-time price level changes and suggested a wait-and-see approach regarding the recent rapid increase in energy prices might be appropriate.
Additionally, as this was Powell's final meeting presiding as Chair, markets were also focused on his future role. Powell confirmed he would remain on the Board after his term as Chair concludes on May 15, though the duration is "to be determined," citing ongoing legal challenges from the government targeting the Fed. He emphasized that the Fed's independence is crucial for ensuring monetary policy decisions are free from political influence, which is vital for U.S. economic credibility. He pledged to maintain a low profile, support the new Chair, and avoid any perception of acting as a "shadow chair."
Morgan Asset Management believes that, given recent upward pressure on U.S. inflation from rising international oil prices, the Fed's stance is likely to become more cautious in the foreseeable future, maintaining its current policy stance while patiently observing the evolution of the Middle East conflict and its ultimate impact on the economy and prices. The divergence in views among some members reflects a weakening consensus within the Fed during a period of high uncertainty, a situation that may persist after the new Chair takes office. However, optimistically, such divergence can be beneficial during times of rising uncertainty when investors place a premium on the Fed's independence. Attention will focus on potential changes to the Fed's external communication formats—such as policy statements and the dot plot—and frequency after the new Chair assumes the role.
Although the slightly hawkish Fed outcome may trigger short-term corrections in global markets following U.S. equities, the momentum in artificial intelligence-related investments and demand for semiconductors could provide support for medium-term trends, particularly for stock markets in Northeast Asia. While data from CME FedWatch Tool indicated a 40% probability of a rate hike by next April following the meeting, the hurdle for tightening remains high, as most committee members view the current policy stance as neutral. The rise in U.S. Treasury yields is not yet sufficient to warrant a shift to longer duration assets. Furthermore, since the start of the year, most global economies have experienced stable growth with strong corporate earnings fundamentals. Equity assets are still considered to have medium- to long-term allocation value. However, given that uncertainty may continue to cause market volatility, utilizing relatively stable bond coupons, high-dividend assets, and alternative investments to enhance income generation, alongside maintaining a diversified portfolio, remains equally crucial.
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Risk Disclosure: The above information does not constitute investment advice, or an offer or solicitation to purchase any securities, investment products, or services. The information presented is sourced from sources believed to be reliable, but verification is recommended. Investing involves risks; different asset classes have different risk characteristics, and past performance is not indicative of future results. Please refer to the relevant offering documents for details, including risk factors. Views and forecasts are current as of the date of this material and are subject to change.
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