Federal Reserve: The Powell Era Ends with a Status Quo and Some Dissension

Once again, the Fed delivered no surprise by opting to keep its policy rate unchanged. This decision was fully anticipated by financial markets and by all forecasters surveyed by Bloomberg.

Fed officials nonetheless face several challenges. One of the few changes relative to the March statement is that today’s communiqué explicitly notes that the war in Iran is contributing both to higher inflation and to increased uncertainty. As this uncertainty could eventually weigh on US economic growth as well as on labour market conditions, the Fed’s dual mandate is increasingly under strain. Under the circumstances, maintaining the current monetary policy stance therefore appears appropriate. The vast majority of the Federal Open Market Committee (FOMC) shares this view. Continuing a pattern observed since his appointment to the Fed, Stephen Miran dissented in favour of an immediate rate cut. Interestingly, three regional Fed presidents supported the status quo but would have preferred to remove the (slight) bias toward a potential rate cut that remains implicit in the statement. The reference to “additional adjustments” to the policy rate suggests the possibility of a continuation of the most recent rate moves—namely, the cuts delivered in September, October, and December 2025. These three committee members therefore appear reluctant to pre-commit and would rather have the Fed consider both a rate increase and a rate cut as the next possible move.

In what will almost certainly be his final press conference as Chair of the world’s most influential central bank, Jerome Powell—who has indicated that he plans to remain on the Board of Governors for some time—refrained from providing strong guidance regarding the future path of interest rates. Consistent with his usual approach, he reiterated that monetary policy does not follow a predetermined trajectory and that decisions will continue to be made on a meeting-by-meeting basis. That said, he did open the door to a possible shift in the implicit policy bias as early as the June meeting under the leadership of the next Chair, Kevin Warsh, along with other committee members.

The evolution of the conflict in Iran and oil prices clearly remains a key factor that could alter the outlook for growth and inflation. For the time being, both Powell’s comments and our own forecasts do not point to an imminent change in the policy rate. We therefore expect the current rate to remain in place at least until late in the fall 2026.