The Federal Reserve opened its two-day policy meeting Tuesday knowing the outcome in advance. Markets have already priced in a hold. Economists agree there will be no cut. And the man running the meeting — Jerome Powell — is three weeks from the end of his tenure as the most closely watched central banker in the world.
What makes this week consequential is not the rate decision itself. It is everything surrounding it.
A Hold That Was Never in Question
The Federal Reserve is likely to continue its “wait and see” approach to interest rates, with its two key economic variables — the labor market and inflation — remaining relatively unchanged from last month, while the ongoing conflict with Iran makes forecasting both particularly difficult.
Crude oil prices are hovering around $100 a barrel, and the average price nationwide for gasoline is surging again, now around $4.18 a gallon, further complicating the Fed’s path. With energy prices feeding into broader inflation readings, and the Federal Reserve’s preferred gauge of core inflation running at 3% — well above its 2% target — policymakers have neither the justification to cut nor the political appetite to hike.
Brandon Zureick, chief economist at Johnson Investment Counsel, said the Fed “will likely wait for a more decisive signal before taking any policy action,” noting that higher energy prices could keep inflation elevated while simultaneously suppressing economic growth.
Markets are not even entertaining another outcome. The CME Group’s FedWatch tool placed the odds of the FOMC staying on hold at 100% heading into Tuesday.
Powell’s Last Press Conference
Wednesday’s post-meeting press conference carries weight that goes well beyond monetary policy. In what could be Jerome Powell’s final press conference as Federal Reserve chair, he is expected to lead his fellow policymakers toward another cautious pause, with stubborn inflation and a resilient labor market leaving little room yet for interest rate cuts.
The usual read-between-the-lines analysis of Powell’s language will carry less market-moving significance than usual. Jerry Tempelman, a former senior analyst at the New York Fed, said: “If Powell were staying, I might be trying to read more in between the lines of what he says at the press conference.”
What analysts will be watching instead is whether Powell addresses his future at the institution. His chairmanship ends May 15, but his term as a Fed governor runs through January 31, 2028. He has the option to stay on at the central bank for the final two years of his term as governor, and so far has provided no indication of what he will do.
EY-Parthenon Chief Economist Gregory Daco anticipates Powell is “more likely than not to remain on the board,” explaining that the “rationale is institutional continuity, not politics.”
The Path Opens for Warsh
The week’s parallel drama involves the man poised to replace Powell. The Justice Department ended its investigation into Powell’s oversight of the Fed’s extensive building renovations, clearing a major roadblock to Kevin Warsh’s confirmation as his successor.
That investigation had been the lone obstacle standing between Warsh and a Senate floor vote. Sen. Thom Tillis of North Carolina, who had vowed to block the confirmation while the probe was ongoing, dropped his opposition once the DOJ closed its inquiry. The Senate Banking Committee is scheduled to vote on Warsh’s nomination this Wednesday, April 29.
At his confirmation hearing before the committee last week, Warsh drew a clear line on the question of independence. “The president never once asked me to commit to any particular interest rate decision, period,” Warsh said under questioning. “Nor would I ever agree to do so if he had. I will be an independent actor if confirmed as chair of the Federal Reserve.”
Those remarks came hours after Trump, appearing on CNBC, was asked if he would be disappointed should a Warsh-led Fed not immediately cut rates. Trump responded: “I would.”
What a Warsh Fed Looks Like
For American consumers, the leadership transition is not an abstract institutional matter. The incoming chair has outlined a substantially different operating philosophy from the one that has guided the Fed for the past decade.
A critic of the Fed’s 2020 shift to flexible average inflation targeting — which allows inflation to temporarily exceed 2% — Warsh favors reverting to a strict 2% target and has called for a broader reassessment of how inflation is measured. He is also a proponent of interest rates as the primary tool for fighting inflation, and has signaled an intent to reduce reliance on the Fed’s balance sheet.
Perhaps most consequentially for day-to-day market communication: Warsh wants to abandon the practice of forward guidance, including the dot plot — which charts each FOMC member’s projected rate path for the months ahead — a tool that could therefore become a relic of the past under his leadership.
For mortgage borrowers, retirees, and small business owners watching the Fed for signals on where borrowing costs are headed, the loss of that forward visibility represents a meaningful shift in how they will need to interpret central bank signals going forward.
The Bigger Picture
If confirmed, Warsh would inherit a period of considerable uncertainty. The threat of large-scale AI-driven job displacement raises questions about the labor market. After five consecutive years of inflation above the Fed’s 2% target, with cumulative price increases approaching 25%, many Americans continue to feel the strain of an affordability crisis. The economic fallout from the Iran war has added further pressure.
The debate over Fed independence — sharpened by Trump’s public demands for lower rates and the DOJ’s investigation of Powell — will not dissolve simply because Warsh takes the chair. Rohit Chopra, former director of the Consumer Financial Protection Bureau, said: “We are seeing signs that there is a desire to really shift the Fed into surrendering more control to the White House and the Treasury Department.”
Warsh has insisted that will not happen on his watch. Markets, for now, are taking him at his word — but the stress test of that independence has not yet arrived.
The Fed’s rate decision and Powell’s press conference are scheduled for Wednesday, April 29, at 2:00 p.m. and 2:30 p.m. Eastern Time, respectively. The Senate Banking Committee vote on Warsh’s nomination follows the same day.
