The Federal Reserve held interest rates steady at 3.5%-3.75% on Wednesday, citing inflation risks from the Iran conflict and global energy price surges. The 11-1 vote marked the fourth straight meeting without a rate change following three consecutive 25-basis-point cuts late last year.
Record Dissents Signal Deep Divisions
Four total dissents marked the highest count since 1992. Fed Governor Stephen Miran pushed for a 25-basis-point cut. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan opposed language showing bias toward easing, favoring a more neutral stance.
“We’ve had four supply shocks — the pandemic, Ukraine invasion, tariffs, and now Iran with the oil spike,” Powell said during his press conference. “Every supply shock drives inflation up and unemployment up. The central bank has a really hard time knowing what to do.”
Powell’s Last Press Conference as Chair
April’s FOMC meeting will likely be Powell’s final meeting as chairman, with his term expiring May 15. He congratulated expected successor Kevin Warsh on his nomination advancing from the Senate Banking Committee earlier Wednesday.
Powell plans to remain as a Fed Board governor until January 31, 2028, citing concerns over Trump administration investigations into the central bank. He noted the U.S. Attorney closed the criminal probe last week, though she could restart it. “The Department of Justice provided assurances they will not reopen the investigation unless there’s a criminal referral from the Fed’s inspector general,” he said.
“These legal actions by the administration are unprecedented in our 113-year history,” Powell added. “My concern is about illegal attacks on the Fed threatening our ability to conduct monetary policy without considering political factors.”
Powell emphasized he won’t serve as a “shadow chair” once Warsh is confirmed: “There’s only ever one chair of the Federal Reserve Board. When Kevin Warsh is confirmed and sworn in, he will be that chair.”
Market Outlook Remains Uncertain
The FOMC statement noted the Middle East conflict “contributing to a high level of uncertainty about the economic outlook.” The economy continues expanding with low job gains and elevated inflation from rising global energy prices.
On oil prices, Powell said: “In the textbook, you would look through an oil shock because they tend to be short-lived. That’s all the more true given we’re several years above 2% inflation and already looking through the tariff shock. The question about looking through energy isn’t in front of us right now — it hasn’t even peaked yet.”
Ellen Zentner of Morgan Stanley Wealth Management noted: “Jerome Powell sounded consistently cautious. Firm economic growth, sticky inflation, and a stable jobs market don’t justify lower rates. A changing of the guard at the top of the Fed isn’t going to change the central bank’s calculus.”
Kay Haigh of Goldman Sachs Asset Management said the Fed’s guidance “indicates it’s in a stable place when it comes to policy direction. While upside risks to inflation have increased, the Fed is keeping one eye on potential weakness in growth and the labor market. This balance could see rates being brought back down to neutral later this year.”