Federal Reserve Holds Rates Steady Before Chair Powell Exit/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The Federal Reserve kept its key interest rate unchanged for a third straight meeting while signaling possible cuts later this year. Four officials dissented from the decision, the highest number of disagreements on the Fed’s policy committee since 1992. The rare divisions come as Jerome Powell prepares to leave as chair and Kevin Warsh moves closer to taking over.
Federal Reserve Interest Rate Decision Quick Looks
- The Fed kept its benchmark interest rate at 3.6%
- This marks the third straight meeting without a rate change
- Four officials dissented, the most since October 1992
- Three officials opposed signaling a future rate cut
- One official, Stephen Miran, wanted an immediate rate cut
- Inflation remains elevated at 3.3%, partly due to higher oil prices
- Jerome Powell may be leading his final Fed meeting as chair
- Trump nominee Kevin Warsh is moving toward confirmation as Powell’s successor
Deep Look
Federal Reserve Holds Rates Steady Again
WASHINGTON — The Federal Reserve left its benchmark interest rate unchanged Wednesday for the third consecutive meeting, keeping borrowing costs steady while signaling that future rate cuts are still possible despite growing divisions inside the central bank.
The Fed maintained its short-term benchmark rate at 3.6%, a move widely expected by financial markets as inflation pressures remain stubborn and economic uncertainty continues to rise.
However, the decision revealed unusually sharp disagreements among policymakers, with four officials formally dissenting — the highest number of dissents since October 1992.
The split highlights growing tension inside the Fed just as Chair Jerome Powell prepares to leave office.
Rare Level of Internal Disagreement
The Federal Reserve’s policy statement kept language suggesting that the next move could still be a rate cut later this year.
But three officials opposed keeping that language in place.
Beth Hammack of the Cleveland Fed, Neel Kashkari of the Minneapolis Fed, and Lorie Logan of the Dallas Fed all dissented because they wanted the Fed to remove references suggesting future cuts.
They argued inflation risks remain too high to signal easier monetary policy.
At the same time, Fed Governor Stephen Miran took the opposite position and dissented in favor of an immediate rate cut.
That combination created the largest number of policy disagreements in nearly 34 years.
The dissents show how divided the Fed has become over whether inflation or slowing growth should be the bigger concern.
Inflation Still Creating Pressure
In its official statement, the Fed pointed directly to Middle East instability and rising energy prices as major economic concerns.
“Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook,” the Fed said.
“Inflation is elevated, in part reflecting the recent increase in global energy prices.”
The Iran war has pushed gasoline prices sharply higher, helping drive inflation up to 3.3%, the highest level in two years.
That remains well above the Fed’s long-term target of 2%.
Traditionally, the Fed keeps rates high—or even raises them—when inflation worsens, making immediate cuts difficult even as President Donald Trump continues demanding lower borrowing costs.
Jerome Powell Nears the End of His Term
Wednesday’s meeting is likely Jerome Powell’s final one as Federal Reserve chair before his term ends on May 15.
Powell is expected to hold a news conference later in the day, where investors will closely watch for signs about whether he plans to remain on the Fed’s Board of Governors after stepping down as chair.
That would be an unusual move.
Powell still holds a separate governor term lasting until January 2028, but Fed chairs traditionally leave the board when their leadership term ends.
If Powell stays, he would become the first Fed chair to do so since 1948.
His decision could significantly affect the balance of power inside the central bank.
Kevin Warsh Moves Closer to Taking Over
Earlier Wednesday, the Senate Banking Committee approved Kevin Warsh as Trump’s nominee to replace Powell as chair.
The vote passed strictly along party lines, moving Warsh one step closer to final Senate confirmation.
Warsh has publicly supported interest rate cuts and has promised what he calls “regime change” inside the Federal Reserve.
He has signaled major reforms involving the Fed’s economic models, communication strategy, and long-term balance sheet management.
Trump has strongly backed Warsh, seeing him as more aligned with White House economic goals than Powell.
Still, even if confirmed, Warsh may struggle to push through rapid rate cuts while inflation remains above 3%.
Powell Staying Could Create “Two Popes” Problem
Some analysts warn that if Powell remains on the board while Warsh becomes chair, the Fed could face what they describe as a “two Popes” situation.
In that scenario, both the current chair and former chair would remain powerful figures inside the institution, potentially dividing loyalties among policymakers.
Some Fed officials could continue following Powell’s leadership even after Warsh officially takes over.
That could create internal conflict and increase tensions between the White House and the Fed.
Powell has made protecting the Fed’s independence one of the defining goals of his leadership.
Staying on the board could be seen as part of that effort, but it could also deepen political conflict with the Trump administration.
Economy Sends Mixed Signals
The Fed’s challenge is made harder by conflicting economic signals.
Inflation is rising again, but hiring has slowed sharply, leaving many Americans struggling to find new jobs.
Normally, the Fed cuts rates when the labor market weakens to encourage more spending and job creation.
But layoffs remain relatively low, and employers appear to be following what economists describe as a “low-hire, low-fire” strategy.
Unemployment actually improved slightly, falling to 4.3% in March from 4.4%.
Many Fed officials argue that as long as unemployment remains relatively low, there is less urgency to cut rates.
That leaves the central bank balancing two competing risks: rising inflation and slowing growth.
A Critical Transition for the Fed
With Powell nearing his exit, Warsh approaching confirmation, and policymakers deeply divided, the Federal Reserve is entering one of its most uncertain leadership transitions in years.
Wednesday’s decision may have kept rates unchanged, but it made clear that the debate over where the economy goes next is far from settled.
How the Fed handles inflation, jobs, and political pressure in the coming months could shape both the economy and the 2026 election landscape.
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