Federal Reserve keeps benchmark rate at 3.6% while signaling potential cuts, as leadership transition and policy disagreements intensify.
By yourNEWS Media Newsroom
Federal Reserve Chair Jerome Powell said Wednesday he plans to remain on the central bank’s Board of Governors after his term as chair ends next month, as policymakers held interest rates steady and revealed deep divisions over the path forward.
The Fed left its benchmark rate unchanged at 3.6% for the third consecutive meeting following a two-day session of the Federal Open Market Committee. Officials maintained language indicating that the next move could be a rate cut, even as dissent within the committee reached its highest level in decades.
Three policymakers opposed retaining guidance pointing to future rate reductions, while Stephen Miran dissented in favor of an immediate cut. The split highlights growing disagreement among the Fed’s 12-member rate-setting panel as Powell prepares to step down as chair on May 15.
Earlier Wednesday, the Senate Banking Committee voted along party lines to advance the nomination of Kevin Warsh, a former Fed official selected by President Donald Trump to lead the central bank. Warsh has publicly supported lowering interest rates, aligning with the president’s repeated calls for reductions.
In its post-meeting statement, the Fed cited global instability as a key factor shaping its outlook. “Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook,” the central bank said, noting that inflation remains elevated, partly due to rising energy prices tied to the ongoing Iran conflict.
Despite holding rates steady, policymakers face competing pressures. Inflation has risen to 3.3%, above the Fed’s 2% target, while hiring has slowed, creating tension between controlling prices and supporting job growth. The unemployment rate edged down to 4.3% in March, reflecting what some officials describe as a “low-hire, low-fire” labor market dynamic.
Powell told reporters he intends to continue serving as a governor through at least part of his term, which extends to January 2028. He said the decision is driven by concerns over legal actions involving the Fed and the need to preserve institutional independence.
“These legal actions by this administration are unprecedented in our 113-year history and there are ongoing threats of additional actions,” Powell said. “I worry that these attacks are battering the institution and putting at risk the ability to conduct monetary policy without taking into account political factors.”
He emphasized that his decision was not influenced by criticism from elected officials and rejected suggestions that he is remaining to block additional appointments by the administration.
Traditionally, Fed chairs step down entirely when their leadership terms end. Powell would be the first to remain on the board after serving as chair since Marriner Eccles in the late 1940s. He said he plans to maintain a limited public role and avoid interfering with Warsh’s leadership if the nominee is confirmed.
Warsh’s confirmation process is expected to move to the full Senate next month. His potential leadership comes as the central bank confronts a complex economic environment shaped by geopolitical tensions, elevated inflation and uneven labor market conditions.
The leadership transition could introduce further uncertainty within the Fed. Analysts have noted the possibility of competing influence between the incoming chair and Powell if both remain active on the board, though Powell indicated he does not expect to retain a leadership role within the policy-setting committee.
As the Fed navigates its next phase, policymakers continue to weigh whether to maintain restrictive rates to control inflation or shift toward easing to support economic growth, with divisions among officials suggesting that consensus may remain difficult in the months ahead.
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