Fed seen holding rates in likely final Powell meeting

The Federal Reserve is widely expected to keep interest rates unchanged on Wednesday, as policymakers weigh whether to highlight rising inflation risks in their post-meeting statement following what could be Jerome Powell’s final meeting as chair of the U.S. central bank.

With oil prices climbing again amid the U.S.-led war with Iran, Fed officials have expressed growing concern that elevated energy costs could shift from a temporary shock to a more persistent driver of inflation, News.Az reports, citing Reuters.

This scenario could require interest rates to remain higher for longer than previously anticipated or, in more extreme circumstances, increase further.

Ongoing tensions and the continued closure of the strategic Strait of Hormuz have pushed global benchmark oil prices back above $110 per barrel, compared to around $70 before the U.S.-Israeli military campaign against Iran began on February 28. Meanwhile, the Fed’s preferred inflation gauge remains about one percentage point above its 2% target, and upcoming March data expected later this week may show further increases.

Market participants see little likelihood of a rate cut before mid-next year. This reflects skepticism about incoming Fed leader Kevin Warsh’s ability to persuade colleagues that rising U.S. productivity could help lower inflation and support a more accommodative monetary policy.

Michael Feroli, chief U.S. economist at JPMorgan, said that developments since the Fed’s March meeting — including stronger labor market data alongside persistently high inflation — could lead to a slightly more hawkish tone. However, he noted it is unlikely the Fed will signal potential rate hikes in its statement. Robust job gains in March lowered the unemployment rate to 4.3%.

The Fed’s rate decision and policy statement are scheduled for release at 2 p.m. EDT (1800 GMT), followed by a press conference with Powell 30 minutes later.

In addition to discussing the meeting’s outcomes and the economic outlook, Powell may address his future plans as Kevin Warsh is expected to be confirmed by the Senate in time for the Fed’s June 16–17 meeting.

Warsh’s nomination advanced after the U.S. Department of Justice dropped a criminal investigation into a Federal Reserve building project that some Republican senators had criticized as unfounded and politically motivated. The Senate Banking Committee is set to vote on Wednesday on whether to recommend his confirmation to the full Senate.

Powell’s term as Fed chair is due to end on May 15, although his separate term as a member of the Federal Reserve Board of Governors runs until January 2028.

At a press conference in March, Powell said he would not leave the board until the investigation was fully concluded, but did not rule out remaining as a governor afterward.

“I have not made that decision yet. And I will make that decision based on what I think is best for the institution and for the people we serve,” Powell said at the time.

News.Az 

By Nijat Babayev