Key takeaways from Powell’s last meeting as Fed chair

By Bryan Mena, CNN

Washington (CNN) — The Federal Reserve on Wednesday kept interest rates unchanged for a third consecutive meeting, with some key policymakers signaling concern over still-elevated energy prices due to the US-Israeli war with Iran.

Fed officials kept the benchmark lending rate in a range of 3.5-3.75%, in what was Jerome Powell’s final meeting as chair before his term ends on May 15.

In his post-meeting news conference, Powell confirmed he will step aside as chair but remain on the US central bank’s powerful board for now. He is serving a concurrent term as a Fed governor that runs through January 2028. Powell also underscored the persistent uncertainties around the Iran war and the growing division within the Fed’s 12-person rate-setting committee.

Kevin Warsh, President Donald Trump’s nominee to succeed Powell, is widely expected to favor additional rate cuts this year, and he cleared a key hurdle in his confirmation process earlier Wednesday, putting him firmly on track to assume one of the most powerful positions in the global economy. His nomination is expected to advance to the broader Senate chamber for a final vote.

But, while Warsh may favor lower rates, there currently isn’t a convincing economic argument for easier monetary policy anytime soon — a view that three key Fed voters telegraphed at this meeting.

The decision to hold steady was nearly unanimous, with only Fed Governor Stephen Miran casting a dissenting vote in favor of lower rates than the majority wants for the sixth consecutive meeting.

But Fed presidents Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas “did not support inclusion of an easing bias in the statement at this time.”

Powell on the differing views within the Fed

The latest batch of dissents underscore how difficult it will be for Warsh, if he’s confirmed, to persuade the majority of the Fed’s 12-person rate-setting committee to go along with lower rates.

It is the first time since October 1992 that there have been four dissents of any kind.

Powell said the dissents were indicative of a “vigorous” debate during the meeting, stating that more people wanted the policy statement to communicate a “neutral stance, so that a hike is as likely as a cut.”

For a number of reasons, it will be tough for any Fed official to argue for imminent rate cuts: Energy prices remain elevated due to the Iran war; Americans are still spending, which is lifting company profits; the US labor market is weak, but seems to have stabilized; and the Fed chair does not have unilateral authority over the US central bank’s rate decisions.

“These are really tough, difficult judgments,” Powell said. “You’ve got to have a forecast for each variable, you’ve got to think how long it’s going to take to get back to target, you got to think how restrictive or not is policy, so it’s only natural that you have a range of views on the committee.”

The Fed typically lower borrowing costs if inflation is slowing, unemployment is rising (and at risk of climbing higher), or a combination of the two — neither of which is happening. And that’s allowing Fed policymakers to be prudent, waiting on the sidelines to see everything play out before making a call to raise or lower rates, as several of them have said in recent public speeches, particularly the officials who dissented this week.

While the Fed chair wields considerable influence, controlling the agenda for every Fed meeting, they have only one vote in a committee that makes consensus-based decisions.

“As a soon-to-be former chair, I do understand how hard it is to get consensus with nineteen strong-minded people,” Powell said. There are 12 people in the committee with voting power, and six others who don’t vote but participate in the conversations.

Powell on his future

Powell will be the first Fed chair to remain on the board since 1948, when Marriner Eccles stayed on as a Fed governor for thee more years.

“This is my last press conference as chair,” Powell said, “And I will close with a few thoughts.”

“First, I want to congratulate Kevin Warsh on his advancement out of the Senate Banking Committee this morning. This is an important step forward and I wish him well as that process continues.”

Powell said his decision was based on the possibility that the Justice Department could re-open the investigation into him and testimony he gave to Congress last year on a renovation project to the central bank’s headquarters. DC US Attorney Jeanine Pirro, whose office is leading the probe, said last week that she will “not hesitate to restart a criminal investigation should the facts warrant doing so.”

“I’m waiting for the investigation to be well and truly over with finality and transparency,” Powell said. “And I’m waiting for that. And I will leave when I think it’s appropriate to do so.”

Powell on the Middle East conflict and its economic effects

Powell echoed what several other Fed officials have said recently: The Iran war is making it difficult to know the path of interest rates.

The Fed’s latest policy statement acknowledged just that, stating “developments in the Middle East are contributing to a high level of uncertainty about the economic outlook.”

“We’re kind of waiting to see what happens with events in the Middle East and what are the implications of those events for the US economy,” Powell said. “There is a group who feels like we don’t need to be in a hurry to do that.”

Powell added that “of course, we will move to a hiking bias, if we want a hike,” though he stressed that the Fed isn’t close to hiking rate — at least for now.

“People are not saying we need to hike now,” he said. “But it’s a perfectly good argument to be having.”

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