The Federal Reserve held interest rates unchanged on Wednesday, keeping the benchmark federal funds rate at a range of 3.5% to 3.75% as Jerome Powell delivered what he said would be his last press conference as chairman, a tenure marked in its final months by open conflict with the White House, a criminal investigation he called politically motivated, and a committee fractured by the most dissents recorded at a single meeting in more than three decades.
The Federal Open Market Committee voted 11-1 to stand pat. But the headline number understates the friction inside the room. Fed Governor Stephen Miran dissented in favor of a 25-basis-point cut, while three regional bank presidents, Beth Hammack of Cleveland, Neel Kashkari of Minneapolis, and Lorie Logan of Dallas, opposed language in the statement that signaled a bias toward easing rates. Four total dissents at one FOMC meeting had not happened since 1992, Fox Business reported.
The decision capped a stretch in which the Fed cut rates three times, in September, October, and December, before pausing in January and March. Now, with inflation still running above the Fed's 2% target and global energy prices spiking from the conflict in Iran, the committee chose to wait again.
Powell framed the current economic landscape as one defined by repeated disruptions that make the central bank's job nearly impossible to perform cleanly. He listed four distinct supply shocks: the pandemic, Russia's invasion of Ukraine, tariffs, and now the war in Iran and its effect on oil prices. He acknowledged there could be more.
"Every supply shock has the capability of driving inflation up and unemployment up, and the central bank has a really hard time knowing what to do. So the right thing to do is to try to balance the achievement of those two goals, and that's what our framework calls for us to do."
On the energy front specifically, Powell was blunt about the limits of textbook economics. He said central bankers would normally "look through" a temporary oil shock because monetary policy operates on long lags. But he added a caveat that should concern anyone watching prices at the pump.
"That's all the more true given that we're several years above 2% inflation and we're already looking through the tariff shock, so I think we're going to be very cautious about that. But the question about looking through energy really is not in front of us right now, it hasn't even peaked yet, and I think we'd want to see the back side of that and progress on tariffs before we even thought about reducing rates."
Translation: don't expect a rate cut anytime soon. The FOMC statement itself cited the Middle East war as "contributing to a high level of uncertainty about the economic outlook." Powell pointed to a "decline in the growth of the labor force due to lower immigration and labor force participation" and a "significant rise in global oil prices that has resulted from the conflict in the Middle East."
Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, read the same signal. She said Powell "sounded consistently cautious" and that "the current backdrop of firm economic growth, sticky inflation, and a stable jobs market doesn't justify lower rates." Unless that picture changes, she said, "wait-and-see" will remain the Fed's approach.
FOX Business reporter Edward Lawrence pressed Powell on whether he was handing a divided Fed to his successor. Powell pushed back, framing the disagreements as healthy and predictable given the circumstances.
"It's only natural that you have a range of views on the committee... if everybody agreed, that would be surprising, and I think it's partly a function of extraordinarily challenging set of supply shocks that we've been dealing with now for five or six years."
That successor is Kevin Warsh, the former Fed governor whose nomination cleared the Senate Banking Committee earlier on Wednesday. Powell congratulated Warsh and said he planned to "keep a low profile as a governor" once the transition occurs.
"There's only ever one chair of the Federal Reserve Board, when Kevin Warsh is confirmed and sworn in, he will be that chair once sworn in... his new colleagues will elect him to chair the FOMC as well."
Zentner cautioned against expecting a policy revolution under new leadership. "Aside from the fact that Kevin Warsh hasn't indicated he'll push for aggressive easing, any policy shift will require a consensus from the FOMC, and today highlighted the wide range of opinion on the committee, which will soon include Jerome Powell as governor," she said. "A changing of the guard at the top of the Fed isn't going to change the central bank's calculus, or its process."
Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, offered a similar read. The Fed's statement, she said, "indicates that it's in a stable place when it comes to policy direction, although some members pushed for more two-sided language." She noted that while upside risks to inflation have grown, the FOMC is "keeping one eye on potential weakness in growth and the labor market" and could bring rates back toward neutral later this year, unless Iran escalates further and energy prices keep climbing.
Powell's chairmanship expires May 15. His term as a member of the Fed's Board of Governors, however, runs until January 31, 2028, a distinction that has become the central tension in the standoff between the Fed and the White House.
The chairman used his final press conference to address the criminal investigation that has shadowed his last months in office. He said the U.S. Attorney for the District of Columbia announced last Friday that she had closed the probe. But he was careful to note the investigation was not entirely resolved.
"She also noted, however, that she would not hesitate to restart the investigation. Over the weekend, the Department of Justice provided assurances that they will not reopen the investigation unless there's a criminal referral from the Fed's inspector general. And if they do appeal the recent court decision, they would not seek, as part of that appeal, to restart the investigation, or send new subpoenas."
A federal judge had previously blocked grand jury subpoenas targeting Powell, and the DOJ had vowed to appeal. Powell said he wanted the "investigation to be well and truly over with finality and transparency" before making a final decision about his departure. He said he would "leave when I think it's appropriate to do so."
Newsmax reported that the DOJ's decision to drop the criminal probe removed a major obstacle to Kevin Warsh's Senate confirmation, and that Powell had made the end of the investigation a necessary condition for leaving the Fed's board. Powell himself had said last month he might stay and would "make that decision based on what I think is best for the institution and for the people we serve."
The investigation centered on allegations related to Powell's congressional testimony about the Fed's headquarters renovation, a sprawling, $2.5 billion project that has drawn bipartisan scrutiny. The New York Post reported that senior administration officials described the string of broadsides against Powell as part of a game of "4D chess" designed to pressure him into resigning. One senior government source asked bluntly: "Why would you stay at a party when no one wants you there?"
Powell, for his part, has long vowed he would not leave voluntarily. Fox News reported that he once said: "I will never, ever, ever leave this job voluntarily until my term ends under any circumstances. None, whatsoever." He has also described the criminal investigation as unprecedented, suggesting it stemmed from the Fed setting interest rates independently rather than following the president's preferences.
The sharpest moments of Wednesday's press conference came when Powell addressed the broader pattern of legal and political pressure on the institution he has led since 2018. He drew a clear line between verbal criticism, which he said he has never objected to, and what he called "illegal attacks."
"My concern is really about the series of illegal attacks on the Fed which threaten our ability to conduct monetary policy without considering political factors."
He added that the legal actions taken by the administration were "unprecedented in our 113-year history" and warned of "ongoing threats of additional such actions." He said he worries these efforts are "battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policy without considering political factors."
Powell framed the Fed's independence as foundational to American prosperity. "It is so important for economy, for the people that we serve, that they can depend, over time, on a central bank that operates that way free of political influence," he said. "It's part of the absolute foundation of this amazing economy that we have, it's just one of the many reasons why the U.S. economy is the envy of the world."
The question now is whether Powell will stay on as a rank-and-file governor, a move that would deny the White House an immediate board majority. Breitbart reported that David Wilcox, a former top Fed economist and senior fellow at the Peterson Institute for International Economics, said he finds it "very difficult to see Powell leaving before midnight on Jan. 31, 2028." Wilcox described the pressure campaign as "a mortal threat to the governance structure of the Fed as we've known it for 90 years."
President Trump appointed Powell as Fed chair in 2017 and has repeatedly criticized him and threatened to remove him. The DOJ's decision to close the criminal probe and hand the inquiry to the Fed's inspector general may have eased one source of pressure, but the broader contest over the Fed's direction is far from settled.
Powell said his future decisions "will continue to be guided entirely by what I believe is in the best interest of the institution and the people we serve." He said he intends to continue serving as a governor "for a time to be determined."
With Warsh's nomination advancing and Powell's chairmanship set to expire in weeks, the Fed stands at a genuine inflection point. Rates are on hold. Inflation remains sticky. Energy prices are climbing. The committee is more openly divided than it has been in a generation. And the outgoing chairman just told the country, in his final press conference, that the institution he built his career defending is under threat.
Whether Powell stays on the board or walks away entirely will shape the balance of power at the Fed for years. The White House has made clear it wants a clean break. Powell has made clear he does not intend to be pushed.
The American economy doesn't need a central bank at war with itself. It needs one that can hold steady, make hard calls, and answer to the public, not to political convenience on either side.
