Without surprises but with intense internal divisions, the latest meeting of the Federal Reserve under the leadership of Jerome Powell concluded, with the American central bank keeping the benchmark interest rate unchanged, for the third consecutive meeting, in the range of 3.50% to 3.75%, confirming market expectations that had fully priced in the decision.
However, behind the “expected” decision, a sharp split was recorded within the Committee, as the vote was formed at 8-4, something that had not occurred since 1992. This is a development that reflects the differing approaches of officials toward persistent inflation and the direction of monetary policy.
Recent data show that economic activity in the USA continues to grow at a steady pace, while the labor market appears resilient, despite the slowdown in hiring. The unemployment rate remains relatively stable, with wage pressures declining but not eliminated.
At the same time, inflation remains at high levels, partly due to the rise in international energy prices.
Disagreements
The disagreement within the Fed had different characteristics. Stephen Miran supported a rate cut of 0.25%, continuing the line he has followed since joining the Board in 2025. In contrast, Beth Hammack, Neel Kashkari and Lorie Logan disagreed not with the decision to hold, but with the fact that the statement leaves open a window for future easing.
At the center of the disagreement was the wording that the Committee will consider “additional adjustments,” something that implies a possible future rate cut, reinforcing the perception that the Fed maintains a mild “dovish” stance, despite persistent inflation.
The Fed reaffirmed that its primary goal remains achieving maximum employment and returning inflation to 2%, however geopolitical developments and especially the rise in energy prices complicate its task. Officials appear more cautious, as the duration of inflationary pressures increases the risk of permanent effects on the economy.
From the labor market side, the data remain relatively strong, with jobs increasing and unemployment moving close to 4.3%, something that reduces concerns about recession, but does not yet justify aggressive easing of monetary policy.
The last meeting with J. Powell at the helm
In a climate of division, the latest meeting of the Federal Reserve under Jerome Powell took place, with him referring to an “intense discussion” regarding the direction of monetary policy.
As he stated, the number of officials who now consider a rate increase as equally likely as a decrease is increasing, while the tendency in favor of a more “neutral” policy stance is also strengthening. However, the majority of the Committee did not consider it appropriate to immediately change the wording of the guidance, with Powell emphasizing that “there is no rush,” as the data of the next 30-60 days may overturn the balance.
He even confirmed that disagreements within the Fed are intensifying.
Inflation, economy and geopolitical risks
The head of the Fed stressed that inflation in the USA remains elevated, partly due to rising energy prices, while developments in the Middle East intensify uncertainty. According to estimates, the PCE index stands at 3.5% for March, with the core index at 3.2%.
At the same time, he pointed out that consumer spending remains resilient and unemployment almost unchanged, although labor demand has clearly declined and employment growth is slowing, also reflecting slower growth of the labor force.
Powell underlined that the current monetary policy is considered appropriate, however risks are two-sided, both for inflation and for growth, with short-term inflation expectations having increased, while long-term ones remain close to 2%.
Leadership change
J. Powell congratulated Kevin Warsh, the choice of Donald Trump for the position of chairman of the Fed, revealing that they had a “very good conversation” at a dinner in January, referring to a “smooth and typical transition.”
The shadow of political pressure
In his last press conference as chairman of the Fed, Powell reiterated that the mission of the Bank remains ensuring stable prices, a strong labor market and a reliable financial system.
At the same time, he clarified that he will remain a member of the Board of Governors for a period after the end of his term, until pending procedures are completed, emphasizing that he will not step down until a relevant investigation is fully completed with transparency and finality.
However, particular impression was caused by Powell’s direct attack on the Trump administration, referring to “unprecedented” interventions in the history of the Fed. “The legal actions of the administration are unprecedented in our 113-year history,” he noted, expressing concern that such moves undermine the independence of the Central Bank and “strike” the institution.
As he stressed, maintaining the independence of the Fed constitutes a critical factor for the stability of the economy, warning that political pressure may affect monetary policy.
www.bankingnews.gr
Σχόλια αναγνωστών