TreasurySpring
Friday, May, 01, 2026
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This commentary follows the FOMC's update and is the opinion of TreasurySpring's capital market experts, Glen Stone and Nigel Owen, and does not constitute legal, investment, or other advice.
Rate decision:
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Federal Open Market Committee (FOMC) voted 11-1 for no change (one vote for a 25bp cut)
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Fed maintained its easing bias, despite dissenting views from three regional Fed bank presidents
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Market implying next move is up, but not soon
What has changed since the last meeting?
With two months of inflation data available since the last meeting, inflation had stabilised at 2.4% in February before rising to 3.4% in March, largely driven by higher oil prices due to the conflict in Iran. The Fed’s preferred measure, the core PCE Index, showed a similar pattern: easing to 2.8% in February before increasing to 3.5% in March. Meanwhile growth has recovered to 2% in Q1 2026 from 0.5% in Q4 2025.
Unemployment fell slightly to 4.3%, below expectations to remain at 4.4%. Wage growth, however, showed signs of easing, with hourly earnings rising 3.5% year-on-year – the slowest pace since May 2021. At the same time, March non-farm payrolls came in stronger than expected. Although we do often see these figures revised, the overall picture suggests the US labour market still looks strong.
Short-term rates have been something of a rollercoaster in recent months. While the front end (under 3 months) has largely been stable, expectations have shifted sharply. Going into the meeting, the market was pricing in a 25% chance of a cut by mid-2027.
What has changed as a result of this Fed meeting?
The dissent from Hammock, Kashkari, and Logan around the easing bias has been heard and matched in the market, shifting from a small chance of a cut to a small chance of a hike. With that said, compared to the volatility seen over the last two months, this remains a relatively modest move.
What could happen from here?
Even if the war were to end tomorrow, it would be very optimistic to expect oil prices, risk sentiment, and rates to quickly return to pre-war levels. Brent crude rose above $120 following the meeting, and although it has eased slightly, it remains elevated. With a supply and production shock, it’s likely going to take some time for that price to settle back to pre-war levels. While a fragile ceasefire is currently in place, reaching a lasting resolution may well see further posturing and more escalate rather than de-escalate tensions.
There are many big unanswered questions, so the data needs to be watched closely to see if it gives any clues to those answers.
What about the make up of the FOMC?
We can now be confident Kevin Warsh will be in place as Chair from mid-May, however uncertainty remains around Jay Powell’s position – specifically whether he will stay on the Board for the remainder of his term. If Powell does remain, it would push Stephen Miranoff the Committee, and limit President Trump’s ability to secure a majority of Fed Governors appointed by him. For now, it feels like Powell is having his “I’m not leaving” Wolf of Wall Street moment…
Sources: tradingeconomics.com, Bloomberg
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TreasurySpring’s blogs and commentaries are provided for general information purposes only, and do not constitute legal, investment, or other advice.