Powell exits, oil prices take the stage, hawkish tone heats up across the board—Wall Street comments on the Fed decision

The Fed remained on hold, yet Wall Street heard an even louder hawkish signal. Three dissenting votes against retaining an easing bias, inflationary pressure from surging oil prices, and Chairman Powell’s term nearing its end collectively pushed the market from rate-cut trading into more complex rate-hike risk pricing.

According to Chasing Wind Trading Desk, at the FOMC meeting on April 29, the Fed kept the federal funds rate target range unchanged at 3.50%-3.75%. Post-meeting interpretations by Goldman Sachs, Bank of America, JPMorgan Chase, and HSBC all pointed to the same conclusion: the truly important issue is not the rate decision itself, but the widening divergence in statement wording, signaling that consensus on policy direction within the committee is weakening.

Deteriorating Iran situation and oil prices became another central theme on the day of the meeting. Bank of America noted that the 2-year U.S. Treasury yield rose 10 basis points that day, only about three of which occurred after the Fed’s decision announcement, with the remaining 7 bp mainly coming from Brent crude’s one-day surge of 8%, reaching $120/bbl. JPMorgan also believes that the Iran situation and risks at the Strait of Hormuz have pushed up energy prices, directly narrowing the Fed's scope for easing.

Power transition has amplified policy uncertainty. Powell confirmed that this would be his last FOMC meeting as Fed Chair, and said that after his term ends, he will remain on the FOMC as a regular Board member, with length of stay undetermined. Meanwhile, the Senate Banking Committee has advanced the nomination of Kevin Warsh as Fed Chair. An era of monetary policy has formally ended, and the new leadership’s policy style and communication framework are becoming a new market focus.

Three Dissenting Votes, Easing Bias No Longer Secure

The signal attracting the most attention from this meeting was the split over statement wording within the FOMC.

David Mericle, economist at Goldman Sachs, pointed out that members Hammack, Kashkari, and Logan opposed the wording in the statement implying an easing bias. This outcome was unexpected for Goldman Sachs. Meanwhile, Miran supported a rate cut, in line with Goldman’s previous forecast.

The controversy centered on the statement’s phrasing about “timing of additional adjustments.” In market context, this is seen as a signal retaining the possibility for further rate cuts. Opposition from three committee members means some policymakers are unwilling to continue conveying a one-sided easing signal to the market.

Powell admitted at the press conference that the committee had “vigorous discussions” around policy guidance. He stated that the number of members supporting more neutral guidance has increased compared to March, the central stance of the FOMC is moving toward a “more neutral” rate outlook, though most members believe the timing is not ripe. He even noted that wording adjustments may come “as early as the next meeting”—that is, the June 16–17 meeting.

HSBC also emphasized that the essence of this divergence is that policy direction is no longer one-sided. The three members, while supporting unchanged rates, clearly opposed retaining the easing bias, effectively signaling to the market: The next move could be either a rate cut or a rate hike.

“Rate Hike” Returns to Pricing, Rate-Cut Threshold Raised

Wall Street’s common judgment is that the Fed has not formally turned to rate hikes, but the long-dormant term “rate hike” has officially returned to the market’s view.

Bank of America says that after a slightly hawkish FOMC meeting and record oil prices, the market now prices in about 10 basis points of rate hikes in the next 12 months. The bank also notes this differs from the 2022 rate hike cycle, as the current energy shock will also exert downward pressure on growth, something Powell already hinted at in the press conference.

JPMorgan's interpretation is even more hawkish. Its natural language processing model shows that the hawkishness score of this statement and Powell’s press conference has hit its highest level since June 2025. The bank says that monetary market pricing has shifted from previously “nearly one full rate cut by end-2027,” quickly to “almost 50% probability of a rate hike by early 2027.”

Goldman Sachs remains more cautious. The bank still forecasts the Fed may cut rates in September and December, but believes that unless there’s obvious weakening in the labor market, the threshold for rate cuts has clearly been raised. Goldman says that risk of longer rate pause is rising, but remains highly skeptical about a rate hike.

HSBC’s forecast is the toughest. The bank expects the Fed will not cut rates in either 2026 or 2027. HSBC thinks that unless core PCE inflation drops below 3%, or even 2.5%, rate cuts are essentially off the table. Its own forecast shows core PCE inflation staying above 3% through the end of 2026, and above 2.5% through the end of 2027.

Oil Prices Take Center Stage, Iran Situation Dominates Pricing Logic

Unlike previous meetings where Fed statements drove market reactions, this time, energy prices became the core variable for the rate market on meeting day.

Bank of America pointed out that of the 10 bp rise in 2-year Treasury yields, only about 3 bp could be attributed to the Fed’s own decision; most of the gains were driven by Brent crude’s jump to $120/bbl. The bank argues the chief driver of Fed outlook is currently the Iran situation and oil prices, rather than a simple policy reaction function.

JPMorgan also attributed the rise in front-end yields and curve flattening to the worsening Middle East situation and Hormuz Strait risk. Rising oil prices not only push up inflation expectations, but also make it more challenging for the Fed to signal easing.

Powell clearly stated at the press conference that, in the context of war and elevated uncertainty in energy prices, most members see no need to adjust policy guidance now. JPMorgan says that Powell also set prerequisites for potential rate cuts, namely that energy prices need to stabilize and progress on tariff issues.

Goldman Sachs believes that even after future geopolitical conflicts end, some FOMC members may still be reluctant to cut rates with inflation closer to 3% than 2%. Even if inflation overshoots mainly due to tariffs and energy price transmission, policy easing may not come swiftly.

Powell Exits, Warsh Steps In Bringing New Variables

This meeting also marks the end of Powell’s term as Fed Chair.

Bank of America notes it’s the last FOMC meeting Powell will chair. Goldman Sachs also mentions that Powell said after his term expires May 15, he'll stay on the FOMC as an ordinary Board member, with duration uncertain.

Regarding reasons for staying on, Goldman says Powell indicated he is waiting for relevant investigations to conclude in a transparent, final manner, and will leave when appropriate. JPMorgan and HSBC also noted, Powell intends to stay low-profile and not interfere with FOMC operations under Warsh.

Progress on Warsh’s nomination has become a market focus. JPMorgan says the Senate Banking Committee has voted along party lines to approve his nomination. HSBC noted that the full Senate vote has not yet occurred, but if all goes well, Warsh may formally take office before the June meeting.

HSBC believes Warsh may bring systemic changes to the policy communication framework. The bank’s rate strategists noted Warsh has expressed skepticism about the Fed’s “dot plot” rate forecasting mechanism. If forward guidance is weakened in the future, bond market volatility may increase, and term premium for longer-term rates may face upward pressure.

Rate Volatility and Policy Uncertainty Coexist

For fixed income investors, the information from this meeting was not single-faceted. Short-end yields are pressured by oil prices and hawkish pricing, rate-cut expectations pushed back, yet rate hikes haven’t become the consensus base scenario among major banks.

Bank of America believes that for the investment-grade bond market, current yield increases somewhat offset the impact of rate volatility. As implied rate volatility remains below the March peak this year, technical support for investment-grade bonds remains staged.

JPMorgan warns that pressure on short-end yields, rich medium-term Treasury valuations, and policy uncertainty from the change of chairman together make the rates market enter a more complex game stage.

HSBC still maintains its “maximum bullish” stance in multi-asset layers, focusing on U.S. equities. It says despite rate expectations undergoing a hawkish re-evaluation, risk assets performed strongly in April, and optimism about AI industry chain profitability remains a major narrative in multi-asset markets.

Overall, Wall Street’s conclusion of this FOMC is: The Fed didn’t change rates, but changed the probability distribution for the next move. Powell’s exit, oil’s entry, Warsh’s ascension—investors now face not a simple rate-cut timetable, but a new rate environment driven by inflation, energy, labor, and policy communication.

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