Unknowns in the last meeting of the Fed Chairman

The event takes place in a context where global energy prices are still rising and the Middle East war has not had a breakthrough, and is even likely to prolong, causing more instability in the economic and monetary policy prospects of countries. Observers will be watching to see whether Fed officials agree to the possibility of raising interest rates this year, if inflation continues to accelerate. Besides, the question of whether Powell will stay on the Board of Governors after leaving the Chairmanship can also be answered.

Powell’s term as Fed Chairman ends in May 2026. However, his term on the Fed Board of Governors still lasts until 2028. The Board of Governors is the Fed’s highest leadership body, consisting of 7 members responsible for setting monetary policy, banking supervision and national financial stability.

Typically, Fed chairs leave the Board of Governors at the end of their leadership term. However, Powell once emphasized that ending the criminal investigation against him was a necessary condition for him to leave the Board of Governors. During a press conference last month, Powell said he had “no intention of leaving the board until the investigation is concluded in a transparent manner.” He said he could stay longer, “based on what’s best for the organization and the people.”

However, the US Department of Justice last week canceled this investigation. Therefore, the biggest barrier to the approval of Kevin Warsh – US President Donald Trump’s nominee for Fed Chairman – has been removed.

US Federal Reserve officials are expected to keep interest rates unchanged at this week’s meeting. However, they must decide whether or not to increase if inflation continues to accelerate. The prospect of adjusting the Fed’s monetary policy is now much dimmer than at the beginning of the year. The bond market currently predicts that the agency will keep interest rates unchanged until at least mid-2027. The interest rate of 3.4-3.75% has been maintained since December 2025.

Monetary policy “is in a good position, and it may be appropriate to maintain policy at this level for a while,” St. Louis Alberto Musalem said in an interview with Reuters earlier this month.

Few Fed officials oppose keeping interest rates unchanged at this time. Even Governor Stephen Miran, the strongest advocate of monetary easing, recently said he was considering it, as the inflation outlook was “a little less favorable”.

When the fighting broke out, Fed officials said at the time that the impact on inflation and economic growth would depend on how long the conflict lasted and whether oil prices returned to pre-war levels of about $70 a barrel.

After two months of conflict in the Middle East, bombings have stopped, but economic tensions continue. The US is blockading Iran’s seaports, while Iran prevents other ships from passing through the Strait of Hormuz – an essential maritime route to the global energy market.

Brent oil prices have increased about 50% since the beginning of the war. The increase in gasoline and energy prices last month also contributed to the US Consumer Price Index (CPI) in March increasing the strongest in nearly 4 years.

“The longer energy prices remain high and the Strait of Hormuz is restricted, the greater the likelihood that high inflation will take root in many goods and services. Supply chain impacts are also starting to appear. Real economic activity and the job market are starting to slow,” Fed Governor Christopher Waller said last week.

Waller said this quandary could mean keeping interest rates unchanged. However, according to the minutes of the Fed’s March meeting, more and more of his colleagues began to mention the possibility of needing to adjust policy.

Investors will be watching to see if this week’s policy statement includes language that suggests the Fed’s next rate move could change. If so, this will be a significant change.

The Fed “will continue to keep interest rates unchanged at its April meeting,” Bank of America economists forecast last week. “Inflation risks are increasing because the war in the Middle East has not ended. Labor data is also improving. The current question is whether the wording in the policy statement shows two-way risks. This is a very tight decision. Powell has the ability to signal toughness,” the bank said.