Federal Reserve Holds Interest Rates Steady in Split 8-4 Vote at Powell's Final Meeting as Chair

The Federal Reserve held its benchmark interest rate steady at 3.5% to 3.75% for the third time this year in an unusually divided 8-4 vote at Jerome Powell's expected final meeting as chair, with his eight-year tenure expiring next month. Powell announced he will remain as a Federal Open Market Committee governor to defend the institution against legal attacks from the Trump administration, which recently ended a criminal investigation into him and has pressured for rate cuts throughout Trump's second term. The Senate Banking Committee advanced Kevin Warsh's nomination to become the next Fed chair, with the $100 million crypto investor expected to win confirmation in the Republican-controlled Senate. The Federal Reserve cited Middle East conflict and rising energy costs—with gas prices reaching $4.22 per gallon, up 6.2% in a month—as complicating efforts to return inflation to its 2% target.

Federal Reserve's Interest Rate Decision and Powell's Transition

• ▪Bitcoin fell 1.4% in the 24 hours following the Federal Reserve's interest rate announcement
• ▪Fed Governor Stephen Miran called for a 25 basis-point rate cut during the Federal Open Market Committee's latest meeting
• ▪Jerome Powell indicated he would serve as chair pro tempore if Kevin Warsh is not confirmed by May 15
• ▪The Federal Reserve held its benchmark interest rate steady at a target range of 3.5% to 3.75% on Wednesday

Middle East Conflict's Impact on Energy Prices and Inflation

• ▪The national average price for a gallon of gas increased 6.2% over the past month
• ▪The average price for a gallon of gas hovered around $2.99 when the U.S.-Israel war with Iran broke out
• ▪The national average price for a gallon of gas was $4.22 on Wednesday
• ▪Rising U.S. energy costs are potentially complicating the Federal Reserve's efforts to deliver inflation back to its 2% target

Perspective of Jerome Powell

• ▪Jerome Powell is willing to serve as chair pro tempore to ensure continuity if Kevin Warsh's confirmation is delayed beyond May 15

Perspective of Rate cut advocates (including Fed Governor Stephen Miran)

• ▪Four Federal Open Market Committee members dissented from the decision to hold interest rates at 3.5% to 3.75%