US Fed FOMC Meeting Updates: Jerome Powell keeps key interest rate unchanged at 3.5%–3.75%

Jerome Powell said Wednesday he plans to remain on the board of the Federal Reserve after his term as chair ends next month “for a period of time, to be determined,” saying the “unprecedented” legal attacks by the Trump administration have put the independence of the nation's central bank at risk.

“I worry these attacks are battering this institution and putting at risk the things that really matter to the public,” Powell said in remarks at a press conference after the Fed announced its decision to keep its benchmark interest rate unchanged.

Powell’s decision to stay — the first time a Fed chair will remain on the board as a governor since 1948 — denies President Donald Trump a chance to fill a seat on the central bank’s seven-member governing board with his own appointee.

The Senate Banking Committee earlier approved Powell’s successor as chair, Trump appointee Kevin Warsh, on a party-line vote. Powell will continue as a Fed governor, possibly until January 2028

- Associated Press

The dollar touched a new multi-week high on Thursday as fears of a further escalation in the Middle East lifted oil prices, while the Federal Reserve offered no hint of an easing shift.

Meanwhile, the yen breached the 160 level, bringing greater attention to a possible Japanese intervention. Fed Chair Jerome Powell closed out his eight years with rates on hold amid rising inflation concerns.

The Fed's 8–4 decision to leave rates ⁠unchanged was ​its most divided since 1992, drawing three dissents from officials who no longer think the bank should communicate a bias toward easing.

The hawkish tilt sent yields up to their highest levels since March 27. Traders priced out Fed cuts this year on Wednesday, with markets assigning a 55% chance of a rate hike by April 2027, up from roughly 20% before ​the ​decision.

-Reuters

“The Fed didn’t really surprise anyone with the rate hold. But if you listen closely to the tone, it feels like they’re still not comfortable calling inflation ‘under control’ yet, " said Viram Shah, Founder & CEO, Vested Finance.

He added that energy prices are creeping up again, inflation is still a bit unpredictable, and even within the Fed, there’s clear disagreement this time with one of the highest dissent counts in decades.

Shah says that rate cuts path is not clean anymore, adding that a few months back markets were bracing for rate cuts, but today Fed has a more , ‘we’ll wait, we’ll watch, and we’re in no hurry’ stance.

"For investors, this is that phase where nothing feels decisive. Growth is holding up, the economy is still resilient, but inflation is not fully behaving either," he says, adding that in these phases, markets usually don’t move in straight lines.

"You get volatility, you get mixed signals, and you get a lot of second-guessing. That’s exactly where staying diversified and thinking long-term matters the most," he highlighted.

Markets now price in no rate cuts by the US Federal Reserve for this year. Previously few market participants were pricing in one rate cut for later this year, but now there are nearly no expectations of monetary policy easing.

Traders expect key rates to stay within the 3.5-3.75% range. Prior to the West Asia conflict, traders expected two rate cuts by the US central bank.

"The US dollar added to gains on Thursday rising to 98.92 after the FED Reserve kept rates unchanged steady as expected but saw the most dissents in its decision since 1992," said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors.

He added that Safe haven demand was also boosted by another diplomatic setback between Washington and Tehran.

"The Euro fell to 1.1673, GBP to 1.3480 while Yen fell to 160.29. CNH was down to 6.8421, IDR to 17363 and KRW to 1487 all down from yesterdays close after FED delivered a hawkish policy," he added. The US Dollar Index measures the strength of greenback against a basket of six major currencies.

US President Donald Trump, on his social media platform, Truth Social criticised Powell's decision of staying on staying a Fed governor adding that the current Fed chair is not able to secure a job somewhere else.

https://twitter.com/KobeissiLetter/status/2049609008399503750?s=20

US Fed chair, Jerome Powell who is nearing the end of his term has said that he intends on staying as a Fed governor for a longer run. Kevin Warsh will step in as the next chair

https://twitter.com/Ajay_Bagga/status/2049569677077287216?s=20

Warsh has called for “regime change” at the Fed and could alter many of its practices, including the economics models it focuses on, how it communicates with the public, and how large its bondholdings will be in the long run.

Those changes could affect financial markets, but otherwise won’t necessarily be visible to the general public. But Warsh has also advocated for additional interest rate cuts, which could potentially lower borrowing costs for mortgages, auto loans, and business loans. He will face barriers to implementing those cuts anytime soon, however, largely because the Iran war has caused a spike in gas prices, pushing inflation to a two-year high of 3.3%.

The Fed typically keeps rates elevated, or even raises them, to combat worsening inflation.

The dollar hovered near its highest in more than two weeks on Friday after some Federal Reserve policymakers turned hawkish, sending yields to a one-month top, while the Japanese yen's break above 160 sharpened focus on intervention risks.

Fed Chair Jerome Powell closed out his eight years with rates on hold amid rising inflation concerns. The Fed's 8–4 decision to leave the rate unchanged was its most divided since 1992, drawing three dissents from officials who no longer ⁠think the ​bank should communicate a bias towards easing.

The hawkish shift sent yields sharply higher. The 2-year note yield, which typically moves in step with rate expectations, rose to 3.928%, while the 10-year climbed to 4.421% — both their highest levels since March 27.

Traders are now pricing out Fed cuts entirely this year, with markets assigning a 55% chance of a rate ​hike ​by April 2027, sharply up from roughly 20% before the decision.

(via Reuters)

US Attorney for the District of Columbia Jeanine Pirro said on X last week that her office was ending its probe into the Fed’s extensive building renovations because the Fed’s inspector general would scrutinize them instead. But she added that her office could reopen the investigation if “the facts warrant doing so.” Pirro had said previously that she would appeal a court ruling that threw out subpoenas her office had issued.

Warsh has promised “regime change” at the central bank and may make sweeping changes to its economic models, communications strategies, and balance sheet. He has argued in favor of rate cuts, as Trump has demanded, but he will likely find it harder to implement them with inflation topping 3%, above the Fed’s target of 2%.

The Senate Banking Committee earlier approved Powell’s successor as chair, Trump appointee Kevin Warsh, on a party-line vote. Powell will continue as a Fed governor, possibly until January 2028. Warsh, if confirmed, will take a seat currently held by Stephen Miran, a previous Trump appointee, whose term ended in January. Powell's move could make it a bit harder for Warsh to engineer the rate cuts that Trump has demanded, and Warsh advocated for last year, economists say.

The Fed announced that it would keep the policy rate in the 3.50%-3.75% range, where it has been since December. There is also intensifying concern among policymakers about rising inflation that led to their most divided vote since 1992.

Following more than a year in which the Fed was cutting rates and was expected to continue doing so, three of its policymakers on Wednesday dissented because they thought language in the policy statement pointing to an "easing bias" was no longer appropriate given elevated inflation and the massive uncertainty about how the ongoing U.S.-backed war against Iran may affect global oil prices. Fed Governor Stephen Miran also dissented in favor ⁠of a rate cut --- as he has at every meeting since ⁠leaving the Trump administration last year to join the central bank.

"Jerome 'Too Late' Powell wants to stay at the Fed because he can't get a job anywhere else - Nobody wants him," Trump said in a post on Truth Social on Wednesday.

Trump has threatened to fire Powell if he stays on as a Fed governor.

Powell’s decision to stay — the first time a Fed chair will remain on the board as a governor since 1948 — denies President Donald Trump a chance to fill a seat on the central bank’s seven-member governing board with his own appointee.

The Senate Banking Committee earlier approved Powell’s successor as chair, Trump appointee Kevin Warsh, on a party-line vote. Powell will continue as a Fed governor, possibly until January 2028. Warsh, if confirmed, will take a seat currently held by Stephen Miran, a previous Trump appointee, whose term ended in January.

Jerome Powell said the economic impact of the Iran conflict is “substantially less” for the United States than for Europe and Asia, though rising fuel costs are beginning to weigh on consumers.

“If this goes on longer and prices rise further, we’ll feel it more,” he said, noting that Americans are already facing higher costs at the pump. “We’re very aware that people are experiencing higher gas prices across the country, and that hurts.”

Gasoline prices are expected to climb further in the coming days as the summer driving season begins. The national average retail price reached $4.229 per gallon on Wednesday, the highest level since July 2022, according to AAA data.

Powell warned that rising fuel prices could weigh on economic growth, as households cut back on other spending. “When gas prices go up, that’s disposable income coming out of people’s pockets, so they’ll spend less elsewhere. That will have an impact on GDP,” he said.

However, he added that it is not yet clear whether such pressures would warrant an interest rate cut.

Jerome Powell said “nobody’s calling for a hike right now,” but stressed that the Federal Reserve remains ready to act if needed.

“We think our policy rate is in a good place,” he said, adding that the Fed would clearly signal any move—whether a hike or a cut—depending on how conditions evolve.

Like many of his colleagues, Powell avoided giving a firm outlook on the future path of rates, especially amid heightened uncertainty in the United States, where energy prices have surged due to the conflict involving Iran.

Jerome Powell said he has no issue with politicians criticising the Federal Reserve, but warned that legal actions by the Trump administration are “battering the institution” and threatening its independence.

He stressed that what matters most to the public is the Fed’s ability to conduct monetary policy without political interference.

Powell added that the legal actions against him are “unprecedented in our 113-year history” and cautioned that there are ongoing threats of further such moves.

Jerome Powell said the Federal Reserve’s current policy stance allows it to stay patient as geopolitical tensions unfold, including the conflict involving Israel and Iran and the disruption of the Strait of Hormuz.

“We’re in a very good place to wait and see how things work out before we react,” he said, noting the high level of uncertainty.

Powell added that the situation remains unpredictable, particularly around how long the Strait might remain closed. “You can develop any number of scenarios, but we really won’t know until we know,” he said.

Jerome Powell said that while he intends to remain a Federal Reserve governor after his tenure as chair ends, he will maintain a low profile and avoid acting as a “shadow chair.”

“That’s just something I would never do,” he said, stressing his respect for the chair’s role. Powell acknowledged the difficulty of building consensus within the committee and said he does not want to complicate that process.

Instead, he added, he hopes to support the next chair as a constructive participant and help the committee reach consensus.

Jerome Powell said he is staying on at the Federal Reserve due to ongoing legal actions against him and will step down only when he believes “it’s appropriate to do so.”

“I had long planned to be retiring,” he said, adding that developments over the past three months have left him with “no choice but to stay” until he sees the situation through.

Asked whether the pending Supreme Court case involving Fed Governor Lisa Cook influenced his timeline, Jerome Powell said it did not, despite Donald Trump previously attempting to remove Cook over unproven mortgage-related allegations.

Instead, Powell pointed to the ongoing scrutiny around himself. “I’m waiting for the investigation to be fully resolved with finality and transparency,” he said, adding he would step down when he deems it appropriate.

Although the U.S. Department of Justice has closed its probe into Powell, U.S. Attorney Jeanine Pirro has requested the Federal Reserve’s internal watchdog—the Office of Inspector General—to review cost overruns tied to renovations at the central bank’s Washington headquarters.

The inspector general had already been examining the project after Powell himself called for a review last year.

Jerome Powell said the transition to Kevin Warsh as head of the Federal Reserve will be routine, describing it as “a very standard kind of transition process.”

Powell added that he has not been in touch with Warsh since January, noting their last interaction was at a dinner where he congratulated him. He reiterated that he expects no unusual changes in how the leadership shift unfolds.

Looking ahead, Powell made clear he will step back from active leadership. “I plan to keep a low profile as a governor. There’s only ever one chair of the Federal Reserve Board,” he said, adding that once Warsh is confirmed, “he will be that chair,” and future decisions will rest with the new leadership.

“I’ve said that I will not leave the board until this investigation is well and truly over… and I stand by that,” Powell said, underlining his intention to continue serving as a governor beyond his chair term to safeguard institutional stability.

Powell referred to the now-dropped investigation led by Jeanine Pirro into renovations at the Fed’s headquarters, noting she “would not hesitate to restart the investigation.” He reiterated concerns about political interference, stressing he would remain until the matter is fully resolved “with transparency and finality.”

Explaining why he chose to remain at the Federal Reserve, Powell pointed to growing external pressure. “The series of legal attacks on the Fed… threaten our ability to conduct monetary policy without considering political factors,” he said, adding that recent developments left him with “no choice but to stay.”

Jerome Powell said the U.S. economy continues to expand at a solid pace, supported by resilient consumer spending, while noting that the housing sector remains a weak spot.

Jerome Powell said he “welcomes” the decision by the US Department of Justice to drop its probe into the Federal Reserve, while noting prosecutors could reopen the investigation if needed.

He emphasised that the Fed’s effectiveness depends on public understanding, describing the institution as resilient and staffed by highly dedicated professionals.

Powell also confirmed that after his term as chair ends on May 15, he plans to remain on as a governor for an unspecified period, adding that he intends to keep a low profile in that role.

Before confirming he would remain on as a governor, Jerome Powell congratulated Kevin Warsh on clearing the Senate Banking Committee vote earlier in the day, calling it “an important step forward.”

He also highlighted what he described as the “fundamental purpose” of the Federal Reserve, emphasizing the institution’s resilience and the expertise of its staff. Powell said it had been a privilege to serve alongside dedicated public servants across the Board of Governors and the broader Federal Reserve System.

Jerome Powell said the U.S. economy continues to expand at a solid pace but warned that rising global energy prices have pushed inflation higher.

Opening what is likely his final policy address as head of the Federal Reserve, Powell noted that developments in the Middle East are contributing to “high levels of uncertainty” around the economic outlook.

He added that consumer sentiment remains resilient, even as inflation has moved up in recent months.