Powell holds a press conference tomorrow morning—keeping interest rates unchanged is not a foregone conclusion. What should the next Federal Reserve decision focus on?

The U.S. Federal Reserve (Fed) is holding a two-day interest rate decision meeting. Fed Chair Jerome Powell will hold a press conference early Thursday morning (4/30) at 2:30 a.m. Against the backdrop of geopolitical tensions in Iran causing volatility in energy prices, the dual pressures of rising inflation and slowing economic growth have become especially pronounced. The Fed is expected to keep the current benchmark interest rate level, to buy more time to evaluate incoming macroeconomic data. Beyond the direction of monetary policy, what the market may be most concerned about is Powell’s fate in the role, along with subsequent personnel changes and their impact.

Fed rate expectations and slight adjustments to the policy statement

The Fed will hold its two-day interest rate decision meeting, and after the press conference in Washington on Wednesday afternoon at 2:00 p.m. (Taiwan Thursday early morning at 2:00 a.m.), it will issue the statement. The market broadly expects that the Federal Open Market Committee (FOMC) will keep the federal funds rate in the 3.5% to 3.75% range for the third consecutive time. Faced with energy price surges and potential inflation pressures stemming from the Iran conflict, policymakers currently lean toward a wait-and-see approach. Bloomberg estimates that, in the policy statement, the Fed will likely make a slight adjustment to the description of the labor market, reflecting the employment market’s resilience even as hiring slows. At the same time, to address inflation risks, the official wording in its forward guidance could be adjusted to preserve policy flexibility for future rate hikes rather than only rate cuts—this would directly affect the market’s assessment of changes in overall funding costs.

Powell’s next moves and a key variable in whether the governors stay

Because the market has already priced in a high probability that rates will be held unchanged, the focus is instead on whether the current Fed Chair Jerome Powell will stay in the position. His chair term will expire on May 15, and this meeting is expected to be his last post-meeting press conference as chair. Investors are closely watching his comments on his personal career plans—especially whether he will continue to carry out his term as a Fed governor, which is not set to expire until January 2028. Powell has previously emphasized that only after the judicial investigation into the headquarters renovation budget is concluded thoroughly and transparently will he consider leaving. Although the U.S. Department of Justice recently announced the case has been closed, it also stated that it will retain the authority to restart an investigation if new facts warrant it. Whether Powell remains as a governor will directly affect the stability of the core of the Fed’s decision-making.

Policy challenges facing the new nominee, Warsh

As the Senate Banking Committee is expected to advance Kevin Warsh’s nomination, his chances of taking over the Fed have increased significantly. However, Warsh will face multiple severe challenges ahead. First, political pressure to cut rates sharply will test Warsh’s ability to maintain the central bank’s independence in monetary policy. Second, although Warsh has pledged to bring institutional changes to the Fed, the pace of his reforms will be constrained by the speed of personnel turnover within the committee. If Powell chooses to remain as a Fed governor, and given the differences in policy stances among current governors, Warsh will inevitably need to engage in complex negotiations and coordination when pushing for a new framework or integrating internal consensus.

In addition, this may also be Stephen Miran’s final time to participate in a policy meeting as a Fed governor, because Warsh has been nominated to take over his seat. The market expects Miran may cast a dissenting vote against the majority’s decisions at each meeting, just as he has done since he joined the Fed in September last year.

This article “What should the Fed focus on for its decision if Powell’s press conference tomorrow makes it a done deal that rates won’t change?” was first published on Lianxin News ABMedia.