Fed remains on hold as Powell defends institutional independence

Jerome Powell's press conference brought no major shift to the monetary trajectory, but it reinforced the more cautious tone of the earlier policy statement. The Fed maintained interest rates within a 3.50% to 3.75% range and sharpened its description of inflation, now labeled "elevated" partly due to the recent surge in global energy prices. Powell also warned that this shock would push headline inflation higher in the short term, while acknowledging that the scale and duration of its effects remain uncertain.

During what is expected to be his final press conference as Fed Chair, attention shifted primarily toward institutional governance following Jerome Powell's confirmation of his intent to remain a Governor "indefinitely" after his chairmanship expires on May 15, until legal risks targeting the central bank are fully clarified. He denounced the Trump administration's legal actions as "unprecedented" and expressed his commitment to defending the Fed's ability to operate without political pressure. However, he assured that he would not seek to become a "shadow chair."

Regional Fed Presidents Beth Hammack (Cleveland), Neel Kashkari (Minneapolis), and Lorie Logan (Dallas) opposed the inclusion of an easing bias in the statement, though they did not push for a rate hike. This detail suggests that a faction of the committee wishes to avoid signaling a rate cut prematurely, contrasting with the more dovish perception of Kevin Warsh, the nominee chosen to succeed Jerome Powell, whose appointment still awaits Senate confirmation.

According to the CME FedWatch Tool, the current range remains the dominant scenario through the October 2027 meeting. The first instance where a cut becomes the most likely outcome appears in December 2027, with a 36.3% probability of a 3.25% to 3.50% range.

The next milestone will be the official April employment figures, due out next week. These will test the labor market's resilience against a Fed that is increasingly focused on its price stability mandate.