Author: Wall Street News
At Powell's last monetary policy meeting as Federal Reserve Chairman, the Fed held rates steady as expected, but this revealed a greater division within the policymaking body regarding whether to continue cutting rates, with some officials questioning whether to continue hinting at a higher probability of rate cuts than rate hikes.
On Wednesday, April 29, Eastern Time, the Federal Reserve announced that the Federal Reserve Monetary Policy Committee (FOMC) decided to maintain the target range for the federal funds rate at 3.50% to 3.75%. This marks the end of the three consecutive FOMC monetary policy meetings since the beginning of 2026, following three rate cuts before the end of last year.
At the subsequent press conference, Jerome Powell, who will step down as Federal Reserve Chairman on May 15, said that the current monetary policy stance is "in a very good position," emphasizing that interest rate cuts still need to wait due to the dual impact of oil prices and tariffs, and warning that political interference would have disastrous consequences for the market and the economy.
Although he will remain a member of the Federal Reserve Board of Governors after his term as Chairman ends on May 15 (until 2028), Powell downplayed his involvement in future Fed intervention, responding to market concerns that he might hinder the new Chairman's administration. He pledged to maintain a low profile.
“I will never do anything like being a shadow chairman, that’s something I will never do… My plan during my tenure as a board member is to maintain a low profile and strive to support the chairman and the direction he wants to go.”
At this meeting, Jürgen Milan, the Federal Reserve Governor handpicked by US President Trump last year, continued to support interest rate cuts. Unlike the previous meeting, in addition to Milan, three other FOMC members with voting rights opposed the rate cut due to the dovish stance of the resolution statement.
The above results mean that, among the 12 FOMC voting members, eight, including Powell himself, supported the resolution statement, while four opposed it.
Nick Timiraos, a veteran Fed reporter often referred to as the "new Fed mouthpiece," pointed out that this decision exposed a more serious division within the Fed regarding whether it should hint at possible further rate cuts. With four out of twelve voting members dissenting, this is the Fed's monetary policy meeting with the largest number of dissenting voices since 1992.
Timiraos commented that the aforementioned dissent may have foreshadowed the expectations expressed by Kevin Warsh, the nominee for the next Federal Reserve Chair, during his confirmation hearing last week. Warsh anticipated a "chaotic meeting" and "internal debate." This disagreement highlights the decision-making challenges Warsh may face as the Fed attempts to address new inflationary risks stemming from the energy shock.
Governor Milan insisted on a 25 basis point rate cut this year, while three regional Fed presidents did not support maintaining an accommodative stance.
The biggest difference between this meeting's statement and the previous one in March is that four FOMC voting members did not support this resolution statement, compared to only one person who opposed it last time.
The voting results released this Wednesday showed that, among the four "dissenters," Federal Reserve Governor Stephen Miran voted against the rate cut again, just as he did at the last meeting, because he supported a 25-basis-point cut.
White House economic advisor Mirren has consistently voted against the Federal Reserve's interest rate decisions since he took over as a governor last September. He advocated for a 50-basis-point rate cut at the three meetings last September, October, and December, and for a 25-basis-point cut at the three meetings this year .
The other three are regional Federal Reserve presidents who have voting rights at this year's FOMC meetings: Beth Hammack, president of the Cleveland Federal Reserve; Neel Kashkari, president of the Minneapolis Federal Reserve; and Lorie Logan, president of the Dallas Federal Reserve.
The three individuals held a different stance than Milan. The statement revealed that they " support maintaining the target range for the federal funds rate unchanged, but do not support reflecting an accommodative bias in the statement ."
Media commentators say the vote results show a divergence of opinion within the Fed, with Milan still advocating for rate cuts, while the other three voting members oppose maintaining the so-called "accommodative bias," which refers to the Fed's consistent indication over the past two years that a rate cut is more likely than a rate hike.
Commentators noted that the wording of the statement from this meeting did not explicitly reveal a dovish stance, nor did it directly mention interest rate cuts. The statement reiterated :
"If risks arise that could prevent the Committee from achieving its objectives, the Committee will be prepared to adjust the stance of monetary policy as appropriate ."
However, the three regional Fed presidents labeled the wording as dovish.
The situation in the Middle East has exacerbated the high degree of uncertainty regarding the economic outlook.
Compared to the previous meeting, the main change in the economic assessment of this meeting's statement lies in the impact of the war in Iran.
The previous resolution statement added a sentence regarding the situation in the Middle East: " The impact of developments in the Middle East on the U.S. economy remains uncertain ." This statement removed that sentence and revised the wording regarding the "persistent high level of uncertainty in the U.S. economic outlook," replacing it with :
" Evolving situations in the Middle East have exacerbated the high degree of uncertainty surrounding the economic outlook ."
Before that sentence, the statement reiterated that the FOMC is committed to achieving its goal of maximum employment and 2 percent inflation in the long run. After that sentence, the statement reiterated that the FOMC is closely monitoring the risks to both employment and inflation.
The new high inflation is partly due to rising global energy prices.
Regarding other comments on the economic situation, this statement made only minor adjustments. Unlike the previous statement, it did not reiterate that inflation remained slightly high, but instead emphasized the impact of the Middle East conflict, stating:
"Inflation is at a high level, partly due to the recent rise in global energy prices."
The previous statement reiterated that job growth remained low; this statement adds a modifier to that statement, changing it to "on average, job growth remains low." The previous statement said that "existing" indicators suggested that economic activity "has been expanding steadily"; this statement simply changes "existing" to "recently."
This statement simply echoed the previous statement that "the unemployment rate has remained largely unchanged in recent months."
The statement made no mention of balance sheet changes such as the purchase of Treasury bonds, indicating that the New York Fed's Reserve Management Purchases (RMP) program is proceeding as planned.
The FOMC meeting in December of last year announced the start of so-called reserve management. The statement at the time said that the FOMC believed that "reserve balances have fallen to adequate levels and will begin purchasing short-term Treasury securities as needed to maintain an adequate supply of reserves." At that time, the New York Fed announced that it planned to purchase $40 billion in short-term Treasury securities over the next 30 days, starting December 11.
The New York Fed’s plan, announced earlier this month, indicates that it will conduct $25 billion in RMP purchases during the monthly cycle ending May 13, a reduction of nearly 40% from the purchase level in December last year.
Powell: Political interference will destroy market trust if there is no shadow chairman.
At the press conference, Powell responded to questions regarding inflation data, the path of interest rate cuts, and recent political pressure on the Federal Reserve.
In response to the recent criminal investigation by the Department of Justice, Powell stated clearly:
“I will not leave the council until the investigation is truly and thoroughly concluded in a transparent and final manner.”
On the issues of interest rate path and inflation guidance that the market is most concerned about, Powell has shown great patience. He believes that current interest rates are already "very close to the neutral rate."
“I’ve always thought the neutral interest rate is between 3% and 4%. We’re slightly above 3.5%. So that’s perfectly within what I consider a reasonable range.”
Powell attributed the recent rebound in inflation to energy conflicts and tariffs. He maintained that:
"Tariffs will cause a one-time price increase, and this effect will fade over time... We do expect this to happen over the next two quarters."
Regarding the oil prices driven up by the situation in the Middle East, he acknowledged that it would push up overall inflation in the short term and could even "hit GDP" by taking away consumers' disposable income, but the Federal Reserve does not need to rush to change interest rates or forward guidance before that.
In anticipation of the upcoming power transition, Powell expressed his full trust and congratulations to his successor, Kevin Walsh, believing it would be a "very normal, standard transition process."
Throughout the press conference, Powell's strongest warnings focused on the risks facing the Federal Reserve's independence. He pointed out that because elected politicians are always campaigning and always want low interest rates, stripping away political control is a core cornerstone in combating inflation.
He spoke frankly to the market and the public:
"Don't think of it as whether an institution is independent or not. Think of it this way: you want the people who make monetary policy to be doing it for the good of the public... and to ignore political considerations, to completely ignore them. If we do that (give in to politics), we will lose credibility. The markets will lose faith in us, and our ability to control inflation and any respect will disappear."
