The Federal Reserve on Wednesday voted to hold interest rates despite recording the most dissenting votes in decades, concluding Jerome Powell’s final meeting as the central bank’s chair amid a contentious relationship with President Donald Trump.
Powell’s term as the central bank chair expires next month.
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The Federal Open Market Committee voted 8-4 to hold interest rates between 3.5% and 3.75%, the most dissenting votes since October 1992.
Fed Governor Stephen Miran voted in favor of a quarter-point reduction, while governors Beth Hammack, Neel Kashkari and Lorie Logan agreed with holding interest rates but did not support language implying potential future reductions in the committee’s statement.
The Fed referred to an “easing bias,” but did not explicitly suggest interest rates would be cut, only that “adjustments” would be made if necessary.
The Federal Open Market Committee updated its statement to reflect that inflation was “elevated,” reflecting a surge in global energy prices brought on by the Iran war, which officials said was contributing to a “high level of uncertainty about the economic outlook.”
Powell will give his last speech as central bank chair at 2:30 p.m. EST, during which he will likely signal the Federal Reserve’s policy should be maintained. His term as Fed chair expires on May 15, after which Kevin Warsh, the former Fed governor whom Trump picked to succeed Powell, is expected to take over. Powell could stay on as Fed governor until his term expires in 2028, though it’s rare for a chair to remain on the Federal Open Market Committee after their tenure. Powell said last month he would “make that decision based on what I think is best for the institution and for the people we serve.”
The Senate Banking Committee voted along party lines to advance Kevin Warsh’s nomination to lead the Federal Reserve. Sen. Thom Tillis, R-N.C., previously vowed to block Warsh’s nomination unless the Justice Department ended a probe into Powell and the Federal Reserve over alleged financial missteps as the central bank renovated its headquarters. That hurdle was cleared last week after prosecutors announced an end to the investigation.
The Fed’s “dot plot,” a graph outlining the central bank’s policymaking decisions, indicated the central bank expected one interest rate cut this year and another reduction in 2027. During the Federal Open Market Committee’s meeting last month, seven of 19 participants said they anticipated interest rates to stay unchanged this year, however. Powell, who noted it was “too soon” to know the scope of the Iran war’s effects on the economy, said unless inflation shifts toward the central bank’s 2% target, “then you won’t see a rate cut.” Deutsche Bank analysts wrote earlier this month that interest rate cuts would require a weakening in labor market conditions and softer inflation. Economists at JPMorgan and HSBC have ruled out any interest rate cuts for 2026, while others at Goldman Sachs, Morgan Stanley and Bank of America favor two interest rate cuts, with the first expected in September.
Trump told the Wall Street Journal in December that he thought Warsh “thinks you have to lower interest rates,” but Warsh told the Senate Banking Committee last week that he was never asked to commit to interest rate cuts and that Trump “didn’t demand it.” Warsh added he did not believe the Federal Reserve’s independence was threatened when elected officials, including Trump, stated their views on interest rates. Analysts expect Warsh to hold onto the Fed’s cautious approach for now: Aditya Bhave, Bank of America Securities’ head of U.S. economics, wrote in a note that Warsh’s outlook “is much more consistent with an extended hold than additional cuts.” Even if Warsh favored interest rate cuts, he would be just one of 12 voters at the Federal Open Market Committee.
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