As expected, the Federal Reserve’s Federal Open Market Committee (FOMC), under the leadership of Chairman Jerome Powell, left the key interest rate unchanged in the range of 3,50 to 3,75 percent. Uncertainty remains too high regarding the extent to which elevated oil prices will ultimately affect inflation and economic activity.

However, there were four dissenting votes within the FOMC, which consists of twelve voting members — the highest number since 1992 — something that did not go unnoticed by Christian Scherrmann, US chief economist at DWS. Stephan Miran, now known as a monetary policy dove, would once again have lowered rates by a quarter percentage point.

Three «Hawkish» Dissenters

More noteworthy are the motivations of the dissenters Beth Hammack, Neel Kashkari, and Lorie Logan. While they agreed with the decision itself, they opposed the wording of the statement. Specifically, they objected to maintaining an «easing bias» in the outlook, meaning keeping the door open for further rate cuts. That said, the statement is already very balanced and emphasizes vigilance regarding risks on both sides of the Fed’s mandate (maximum employment and inflation).

It was also foreseeable that this would be the last FOMC meeting — and thus the final rate decision — under Powell’s leadership, as his term as chairman expires in mid-May. His designated successor is Kevin Warsh.

Powell Seeks a Clean Slate

However, Powell will remain in the FOMC as a regular member (his term in that role does not end until 2028), which is rather unusual for a former chairman. At the press conference, Powell justified this decision by referring to criminal investigations against him related to alleged irregularities in construction work at the Fed’s headquarters in Washington. These had widely been interpreted as the culmination of US President Donald Trump’s attacks on the central bank’s independence.

Although these investigations were dropped last week (so as not to jeopardize Warsh’s confirmation in the Senate), this appears not to be sufficient for Powell. He stated that he intends to remain on the FOMC until the matter is fully resolved. His decision can be interpreted as a backlash against the White House. It also means there is no vacancy that the president could fill with a preferred candidate.

Back in January, Powell had taken a very clear stance on the criminal investigations, describing them as an attack on the independence of the central bank. He subsequently received verbal support from numerous foreign central banks.