The Federal Reserve is expected to keep interest rates steady Wednesday, at what is likely to be Chair Jerome Powell’s last policy meeting as the leader of the world’s most influential central bank.

Last week, a clear path opened up for President Donald Trump’s nominee to replace Powell, Kevin Warsh, to be confirmed by the Senate, when the Justice Department said it would close a criminal investigation into Powell and the central bank.

The Senate Banking Committee is expected to vote Wednesday morning to advance Warsh's nomination to the full chamber for final confirmation.

Powell could still remain at the Fed after May 15, when his tenure as Fed chair ends. So far, he has not given any indication of whether he will or not. As a result, Wednesday’s meeting and press conference will be overshadowed by questions about Powell’s next steps.

Federal Reserve leaders serve simultaneously as chair and as a governor on the Fed’s board. And while Powell's term as chair ends next month, his term as a governor does not expire until January 2028.

Either way, “the presumed transition to Warsh’s leadership makes Wednesday’s meeting less important for markets,” said Citigroup's chief U.S. economist Andrew Hollenhorst on Monday. “There will be no update to economic projections and policy rates are widely expected to remain unchanged.”

While the meeting might be less consequential for investors than some past Fed meetings, there is still plenty for the central bank, and Powell specifically, to address.

Economic fallout

The Fed's rate-setting committee meets at a moment when the U.S. economy is mired in uncertainty and facing headwinds on multiple fronts.

“Further muddying the waters for the Fed are the war, continued uncertainty about tariffs & how innovations in AI could impact the economy in the near & long term,” said KPMG chief economist Diane Swonk in a post on X.

This year, the price of U.S. crude oil has surged almost 70% as a result of the war. Airlines have cut thousands of flights worldwide as the price of jet fuel spikes. In March, inflation overall jumped 0.9% from February, to a more than 3.3% annual rate.

“The impact of the ongoing conflict in the Middle East will be the focus of Powell’s presser,” Deutsche Bank economists predicted on Monday. “With uncertainty still pervasive, we expect he will emphasize that officials are unsure of the precise fallout from the war on the economy and monetary policy.”

The steadiness of the labor market also remains a major unsettled question for Fed policymakers.

“Labor market signals remain mixed and volatile, pointing to broadly stable yet still fragile conditions,” said economists at BBVA on Monday. In January, the U.S. economy added 160,000 jobs, but then shed 133,000 roles in February, before appearing to rebound with the addition of 178,000 roles in March.

“There are no clear and easy policy choices,” Swonk said. “Uncertain times necessitate flexibility. That is another reason to feel uneasy. Sign of the times.”

Powell's big decision

A key factor in Powell’s decision about whether to stay on the board beyond the end of his term as chair is likely to be the status of a politically fraught investigation of the Fed.

Launched by the U.S. Attorney for the District of Columbia — the initial criminal investigation was related to renovations at the Fed’s Washington headquarters.

At Powell's most recent press conference in March, he said, “I have no intention of leaving the [Federal Reserve’s] board until the investigation is well and truly over, with transparency and finality."

The launch of the investigation also infuriated lawmakers on Capitol Hill. One of them, North Carolina Republican Thom Tillis, effectively blockaded Trump's nominee to replace Powell until the probe was dropped.

On Friday, U.S. Attorney Jeanine Pirro announced she had directed her staff to close the criminal investigation and transfer it to the Fed’s inspector general to carry out.

The Fed’s inspector general has already reviewed the renovation project twice in the past decade, and found no wrongdoing.

On Sunday, Tillis told NBC’s “Meet the Press” that he would end his blockade of Fed nominees after getting “assurances from the [Justice Department] that I needed to feel like they were not using the DOJ as a weapon to threaten the independence of the Fed.”

But Pirro concluded her announcement Friday with an unexpected warning, saying, “I will not hesitate to restart a criminal investigation should the facts warrant doing so.”

Adding to questions about the true state of the investigation, White House Press Secretary Karoline Leavitt said on Friday, “The case is not necessarily dropped." On Saturday, Trump remarked to reporters, “You know, it’s not dropped.”

Ahead of Wednesday's meeting, economists at UBS predicted, “Given the risk the probe restarts, Chair Powell might remain on as a Governor for some time.”

“If so, that would be the first time a Chair remained on as Governor for any length of time since Marriner Eccles,” who served as Fed chair from 1934 to 1948.