Chairman Jerome Powell put the political battle front and center by saying Wednesday that he intends to remain on the Federal Reserve while the battle over the central bank continues.
The Federal Reserve kept its overnight lending rate unchanged at 3.5% to 3.75%, sticking to a wait-and-see stance as pressures build from several directions at once.
The world’s most powerful central bank has updated a dots chart that still shows interest rate cuts could arrive in 2026, even as traders retreat from expectations of cuts this year. This has left investors with a split picture: interest rates are fixed now, but there is no clear promise about what comes next.
The markets had a lot to process before Powell stepped to the microphone. Brent crude rose during the Iran war and exceeded $109 a barrel at one point on Wednesday.
Furthermore, February’s PPI came in hotter than expected, giving interest rate cut hopes another hit. Futures markets quickly scaled back their bets on easier policy in the near term.
Chairman Powell said in his press conference:
“The expectation is that we will make progress on inflation, not as much as we had hoped, but some progress on inflation.”
Chairman Powell says he will stay on through the investigation and succession battle
Powell then told us he had no plan to leave while the investigation related to the redesign of the Fed’s headquarters was still ongoing.
“On the question of whether I will leave while the investigation is still ongoing, I have no intention of leaving the Board until the investigation is well and truly concluded transparently and conclusively,” Powell said.
He also talked about what would happen if Kevin Warsh was not confirmed as his successor. As cryptopolitan I mentioned Previously, Sen. Thom Tillis, a Republican from North Carolina, said he would block Warsh’s nomination to the Senate Banking Committee until the Justice Department’s investigation into the restructuring case is resolved.
This position of Tillis turned him into a major obstacle in the process. On Capitol Hill, he broke with his party and repeatedly called the Trump-backed Justice Department investigation “sham.” He used his seat on the Banking Commission to slow Wershe’s course.
On Friday, a federal judge blocked the subpoenas served on the Fed, saying they were backed by “essentially zero evidence.”
After this ruling, Tillis said that this “underscores how weak and frivolous the criminal investigation into Chairman Powell is, and is nothing more than a failed attack on the independence of the Fed.”
Tillis then urged Jeanine Pirro, the US Attorney for the District of Columbia, not to appeal and to drop the order. Didn’t do that. Instead, Peru held a heated news conference after the ruling, and her office quickly filed an appeal. Powell also said he has not decided whether he will remain governor after his term ends and the investigation is over. he He said:-
“Regarding the question of whether I will continue to serve as governor after my term ends and after the investigation is over, I have not made that decision yet, and I will make that decision based on what I believe is best for the organization and the people we serve.”
Chairman Powell is balancing employment weakness with the risks of inflation and oil shocks resulting from the war
As you should know, Trump and his allies have, for more than a year, pushed Powell and other Fed officials to cut interest rates more frequently. The pressure campaign included attacks on social media, angry news appearances on cable channels, and allegations of wrongdoing.
However, the rate path did not trend towards that noise. Powell said the central bank is trying to manage two problems at once: potential weakness in the labor market and continued upside risks to inflation.
He said: “We balance these two goals in a situation where the risks to the labor market are to the downside, which may call for lowering interest rates, and the risks to inflation are to the upside, which may call for raising interest rates or not lowering them in any case.” He added:-
“So we are in a difficult situation, and we feel that… our framework calls on us to balance the risks, and we feel that where we are now is just a kind of dividing line, which is the upper limit between restriction and non-restriction.”
Chairman Powell also backed away from talk of stagflation. He said:-
“I always have to point out that that was a term that dates back to the 1970s, at a time when unemployment was in the double digits and inflation was very high. In fact, we have unemployment really close to the natural rate over the long run, and we have inflation one percentage point higher than that.”
Powell then made the point more clearly: “I would reserve the term stagflation for a much more serious set of circumstances.”
Regarding the broader economy, Powell said:
“The US economy is in good shape.” But he also warned: “We do not know what the effects of this war will be. In fact, no one does.”
Powell said the United States is a net energy exporter, which means some of the damage to growth, jobs and spending could be partially offset because oil producers will earn more and may increase drilling.
