Powell to Stay on Fed Board After Chair Term Ends, Rates Left Unchanged

The US Federal Reserve chair, Jerome Powell, is staying on the central bank's rate-setting board after his term as chair ends in May, a contentious move that signals continued uncertainty at the Fed. Powell made the announcement after the Fed board left interest rates unchanged for the third time this year on Wednesday, despite Donald Trump's continued demands for interest rate cuts.

Before Wednesday, Powell initially said he will step down from the board when the White House's investigations into renovations at the Fed are "well and truly over with transparency and finality." Powell's term ends on 15 May. While he is "encouraged" by the justice department dropping its investigation, Powell noted that there are "remaining steps in the process" that he is watching carefully.

"My decisions on these matters will continue to be guided entirely by what I believe in the best interest of the institution and the people we serve," Powell said, noting that it is important that the Fed "doesn't get pulled into politics, trying to help or hurt any politician or political party." "The things that have happened really in the last three months I think have left me no choice but to stay until I see them through at least that long," he added.

On Wednesday, Fed officials continued to cite elevated inflation, slow job growth and uncertainty in the Middle East as reasons why rates were left untouched. "Jobs gains have remained low, on average, and the unemployment rate has been little changed in recent months. Inflation is elevated, in part reflecting the recent increase in global energy prices," the board said in a statement.

While only one of the board's 12 voting members voted against leaving the rate unchanged, the Fed board also signaled growing dissent within its ranks: three members supported maintaining the current rate, but did not agree with the Fed suggesting it will lower rates later this year.

Brent crude oil, the global benchmark, briefly hit $119 a barrel on Wednesday, a monthly high and a 7% jump over the course of a day as uncertainty around the war in Iran looms.

The Fed's meeting ended hours after the US Senate banking committee confirmed the former Fed governor Kevin Warsh, clearing a procedural path for the whole Senate to confirm him as new chair of the central bank. Warsh is expected to be more amenable to Trump's calls for a rate cut than the current chair, Powell, who has been the target of hostile attacks along with the central bank over its rates agenda. But with just one vote of 12 on the Fed's rate-setting board, Warsh can't deliver cuts without the support of his fellow board members.

By setting interest rates, or the cost of borrowing money, the Fed has enormous power over consumer prices and unemployment. Economists largely agree that an independent central bank is essential for a stable economy. Higher interest rates have helped bring inflation down from a generational high of 9.1% with minimal impact to the labor market. But the central bank's influence has been overshadowed by policies carried out by the White House that have had enormous influence on the economy, from Trump's tariffs and immigration crackdown to higher energy prices amid the war with Iran.

In response to Trump's policies, Fed officials have taken a measured wait-and-see approach: after reaching a two-decade high of 5.25% to 5.5% in 2023, rates are now down to 3.5% to 3.75%. But Trump and his economic advisers have been impatient for rate cuts, arguing that Fed officials are withholding power to stimulate economic growth. Trump says that the Fed should be lowering interest rates more, which would stimulate the economy at the risk of raising prices.

The latest reading on US inflation showed prices went up 3.3% in March – 1.3% higher than the Fed's target inflation rate of 2%. Meanwhile, the unemployment rate has remained stabilized at 4.3% after rising slightly last year.

Trump's fury culminated in a justice department investigation into building renovations at the Fed that went over budget. The president has suggested that Powell's role in the renovations as chair may have been corrupt. In a rare rebuke of the White House, Powell in January called the investigation a "pretext" after the Fed resisted Trump's attempt to influence interest rates.

The investigation cast a shadow over Warsh's nomination after the Republican senator Thom Tillis said he would block Warsh's nomination until the White House dropped Powell's investigation. While the justice department dropped its investigation into Powell last week, satisfying Tillis's demand, the White House suggested that other investigations into the renovations remain ongoing.

"I have directed my office to close our investigation as the [inspector general's office] undertakes this inquiry," the US attorney for the District of Columbia, Jeanine Pirro, wrote in a statement. "Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so."