Federal Reserve holds interest rates steady in Powell's last meeting as chair

An unusually divided Federal Reserve held its benchmark interest rate steady on Wednesday, marking the third consecutive meeting without a change in what was expected to be Fed Chair Jerome Powell’s last time overseeing a rate decision before his term ends May 15.

The Fed’s benchmark interest rate was kept at a target range of 3.5% to 3.75%. But four officials broke from the majority on the Federal Open Market Committee, producing an 8-to-4 outcome — a degree of internal opposition not seen at the Fed since October 1992, according to CNBC. The division reflected competing views on both the direction of interest rates and whether the Fed’s statement should imply further cuts ahead.

Fed Governor Stephen Miran, who has pushed for lower borrowing costs since joining the central bank last fall, cast his vote for an immediate quarter-point reduction. The remaining three dissenters — Cleveland’s Beth Hammack, Minneapolis’s Neel Kashkari, and Dallas’s Lorie Logan — had no objection to keeping rates unchanged but took issue with what they characterized as an easing bias embedded in the committee’s written statement. Specifically, they objected to this line: “In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”

Because the Fed’s most recent actions have been cuts, the use of “additional” signals that another reduction is the likely next step, according to CNBC.

The committee’s written statement flagged inflation as elevated, attributing part of the pressure to rising global energy costs, and pointed to Middle East developments as a source of uncertainty for the economic outlook. Job gains have remained low on average, and the unemployment rate has been little changed, the Fed said.

After the meeting, Powell said he would remain on the Fed’s Board of Governors after his term as chair ends.

“My decisions on these matters will continue to be guided entirely by what I believe is in the best interest of the institution and the people we serve after my term as chair ends on May 15, and will continue to serve as a governor for a period of time to be determined,” Powell said. He also indicated he would not leave the board until a probe into the renovation of the Fed’s headquarters building is resolved.

Powell congratulated Kevin Warsh on the progress of his appointment as Fed chair. Earlier the same day, the Senate Banking Committee advanced Warsh’s nomination in a party-line vote. The full Senate is widely expected to confirm him.

The Fed’s decision Wednesday extended a pause that began after the Fed reduced rates three times in succession during the second half of 2025. At their March gathering, policymakers signaled they anticipate a single rate reduction in 2026 followed by another in 2027, a path that would leave the federal funds rate near its estimated neutral level of roughly 3.1%.