The Federal Reserve announced it would keep the federal funds rate unchanged within the range of 3.50% to 3.75%, aligning with market expectations. The policy statement noted that elevated U.S. inflation partly reflects recent increases in global energy prices. Following the decision, Fed Chair Jerome Powell struck a hawkish tone during his press conference, stating that the current monetary policy stance is appropriate but inflation remains high, with rising oil prices likely to push overall inflation higher in the near term.
This marked Powell’s final press conference as Fed Chair, though he will not be leaving the central bank entirely. Powell reiterated that he intends to continue serving as a Fed governor until the Justice Department’s criminal investigation into the renovation expenses of the Fed’s headquarters is concluded in a “transparent and definitive manner.” He did not specify how long he plans to remain in the role. His term as a governor expires in January 2028.
Typically, a Fed chair steps down from the Board of Governors upon leaving the chairmanship. The last Fed chair to retain a governor role after their term was Marriner Eccles, who served as chair from 1934 to 1948 and remained a governor for three additional years.
Powell commented on his unexpected decision to stay, saying, “I had long planned to retire, but events of the past three months left me with no choice but to stay and see these matters through.” He also pushed back against the Trump administration’s legal actions against the Fed, calling them unprecedented in the central bank’s 113-year history and warning of the threat of further similar measures.
Beyond Powell’s unusual move, the Fed is also facing significant internal divisions. Although the central bank held rates steady as expected, the decision saw the highest number of dissenting votes in an FOMC statement since October 1992, highlighting growing disagreement among policymakers.
Out of the 12 voting FOMC members, four cast dissenting votes. Governor Stephen Miran advocated for a 25-basis-point rate cut, while Cleveland Fed President Hamack, Minneapolis Fed President Kashkari, and Dallas Fed President Logan also dissented. The latter three agreed with holding rates steady but objected to including language suggesting a dovish bias in the statement.
Powell’s continued presence as a governor may trigger a series of ripple effects. Since the Fed chair must be selected from among the seven governors, his retention of the role narrows the field for his successor. Analysts outline several possible scenarios:
1. Miran, currently serving as an interim governor following Kugler’s departure, could be replaced by Warsh, who would then become chair. 2. Cook could be dismissed by the Trump administration, with Warsh taking her seat, though this is seen as unlikely given the Supreme Court’s stance. 3. If Warsh fails to secure Senate confirmation, Powell could serve as interim chair, though this scenario is also considered improbable given Republican control of the Senate.
Analysts suggest that under the first scenario, Miran—a Trump-appointed dovish voter—would have limited influence on overall FOMC sentiment. If Warsh replaces him, the committee’s hawk-dove balance may shift only moderately, with a strong hawkish turn not being the base case. However, given Warsh’s recent Senate testimony acknowledging that “more work needs to be done” on inflation, expectations for a dovish pivot in the near term should be tempered.
Other analysts note that with internal divisions already significant, Powell’s continued presence—even if he avoids acting as a “shadow chair”—could exacerbate policy disagreements. As new Chair Warsh takes over in May and introduces a revised policy framework, internal debates and divergent views are likely to intensify.
During the press conference, Powell repeatedly emphasized the complexity of current inflation dynamics and the challenges facing monetary policy. He explained that while past inflation surges often stemmed from overheated demand and could be tamed with rate hikes, today’s inflation is largely supply-driven. Higher interest rates cannot resolve issues like oil price spikes or tariffs and may instead worsen employment softness, creating a conflict between the Fed’s dual mandates.
Powell also noted that monetary policy operates with long lags, while geopolitical conflicts and energy price fluctuations can shift rapidly, leaving the Fed struggling to respond proactively. Although long-term inflation expectations remain anchored at 2%, short-term expectations have risen due to energy prices, and persistent shocks are eroding public confidence, making it increasingly difficult for the Fed to manage expectations.
Amid ongoing Middle East tensions and high interest rates, the U.S. economy faces stagflationary pressures—rising inflation coupled with slowing growth. The Fed’s current strategy of buying time in hopes that supply-side shocks will fade carries risks: if these shocks persist, the central bank may eventually be forced to make a difficult trade-off between controlling inflation and supporting employment.