The U.S. Federal Reserve Holds Interest Rates Steady at the End of Jerome Powell's Term Amid Unprecedented Division

The U.S. Federal Reserve Holds Interest Rates Steady at the End of Jerome Powell's Term

The Federal Reserve kept the overnight interest rate unchanged, within a range of 3.50% to 3.75%, during its last official meeting under Jerome Powell's leadership, whose term ends in mid-May 2026.

Economic Growth Continues with Stable Unemployment and Slowing Employment

The Fed indicated that recent economic indicators show continued expansion of economic activity at a strong pace, although job gains have been limited on average, while the unemployment rate remained stable with little change.

Sharp Division Within the Fed with a Vote Result of 8 to 4

The decision saw the largest division since 1992, with the vote in favor of holding rates steady at 8 to 4.

Stephen Miran opposed the decision, preferring a quarter-point rate cut, while Beth Hammack, Neel Kashkari, and Loretta Mester opposed including a dovish stance in the statement.

Rising Inflation Driven by Global Energy Prices

The Fed described inflation as "high," compared to its previous description of "moderately high," noting that rising global energy prices were a key factor, especially with escalating tensions related to the war in Iran, which pushed oil prices higher.

Tensions in the Middle East Increase Economic Uncertainty

The committee confirmed that it is monitoring risks that threaten both sides of its dual mandate, noting that developments in the Middle East contribute to increasing uncertainty regarding future economic forecasts.

The Fed Links Any Future Monetary Policy Adjustments to Data

The central bank emphasized that when considering any future adjustments to interest rates, incoming economic data will be carefully evaluated, along with monitoring the evolution of forecasts and risk balances.

Anticipation of Powell's Remarks on the Impact of the Iran War on the Economy

Investors are awaiting Jerome Powell's remarks to assess the implications of the war in Iran on the U.S. economy, especially amid stalled peace talks.

Potential Last Meeting for Powell and Possibility of Continuing on the Board

Powell is chairing what may be his last meeting of the Open Market Committee, with a press conference scheduled to follow.

He may hint at the possibility of remaining a member of the Board of Governors even after his presidency ends on May 15.

Upcoming Vote to Appoint Kevin Warsh as Fed Chair

The Senate Banking Committee is expected to vote on the appointment of Kevin Warsh to succeed Powell, a process that may take a full month and is expected to occur on partisan lines.

Donald Trump Supports Warsh Amid Doubts About Fed Independence

Donald Trump announced in January the selection of Warsh to chair the Fed, noting that Warsh had previously supported Trump's calls for lower interest rates, raising concerns among some congressional Democrats about his independence.