Powell holds rates 3.5-3.75%, ties inflation to Trump tariffs in farewell

Federal Reserve Chair Jerome Powell, six days from the end of his eight-year tenure, used his final press conference to defy Donald Trump’s rate-cut demands and tie elevated US inflation directly to the president’s tariff regime. The Fed held the federal funds rate at 3.5 to 3.75 per cent on April 29 in an 8-4 vote, the third consecutive hold, and Powell told reporters he will stay on the Board of Governors through January 2028 to defend Fed independence from White House legal pressure.

The decision was Powell’s 66th and last press conference as chair before his term ends on May 15. Four members dissented in opposite directions. Fed governor Stephen Miran pushed for a quarter-point cut. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan opposed easing-bias language in the post-meeting statement. The hold keeps the policy rate where it has sat since the December meeting and hands Trump’s nominee Kevin Warsh, advanced by the Senate Banking Committee on a 13-11 party-line vote, a starting position well above where the White House wants it.

Powell laid out the inflation arithmetic in direct terms. “Excluding volatile food and energy categories, core PCE prices rose 3.2% over the 12 months ending in March,” he said. “This relatively high rate largely reflects the effects of tariffs on prices in the goods sector.” The line puts the president’s trade policy at the centre of the Fed’s case against cutting, a position the White House has spent months disputing in public statements and on Truth Social.

He linked the second inflation risk to the Iran conflict. “The economic outlook remains highly uncertain, and the conflict in the Middle East has added to this uncertainty,” Powell told reporters. The framing tracks Boston Fed President Susan Collins’s earlier warning that the war will keep rates elevated into 2027, and aligns with Goldman Sachs’s revised call delaying the next cut to December.

Staying on the board

Powell did not stop at rates. He confirmed he will remain on the Federal Reserve Board of Governors through January 2028, the first outgoing chair to keep his governor seat since Marriner Eccles stepped down in 1948. The move blocks a potential third Fed appointment by Trump in the current term and preserves a Senate-confirmed vote on the seven-member board.

“My concern is really about the series of legal attacks which threaten our ability to conduct monetary policy without considering political factors,” Powell said. He pointed to a now-dropped criminal investigation by US Attorney Jeanine Pirro into the Fed’s $2.5bn headquarters renovation as the trigger.

“I had long planned to be retiring,” Powell told reporters. “And the things that have happened in the last three months, they have left me no choice but to stay until I see them through, at least that long.” He pledged to stay until the legal pressure was “well and truly over, with transparency and finality.”

The president has publicly demanded sharp rate cuts and floated firing Powell on multiple occasions over the past year, threats Powell has consistently rejected on independence grounds. By keeping the governor seat, the chair removes one of the levers the White House could otherwise use to reshape the board ahead of the 2028 election cycle.

What Warsh inherits

Warsh takes over a balance sheet still running off Treasuries and mortgage-backed securities. He inherits a 3.5 to 3.75 per cent funds rate that interest-rate futures price as holding through the September meeting, and a Federal Open Market Committee with at least four dissenters arguing in opposite directions. Miran wants cuts. Hammack, Kashkari and Logan want the statement language to drop any reference to easing.

The new chair will need to broker a consensus before he can move the policy rate at all. The first FOMC meeting under his gavel is scheduled for June 17 and 18, with the accompanying Summary of Economic Projections expected to deliver the first read on whether the rate path Powell leaves behind survives contact with his successor.

Senator Elizabeth Warren of Massachusetts called the Banking Committee’s 13-11 vote on Warsh “the first fully partisan committee vote on a Fed chair” in the panel’s history, an early signal that the political fight over the central bank will not subside with Powell’s departure.

The closing remark

Powell ended the press conference without summing up. After 30 minutes of fielding questions on rates, the dissents, the renovation probe and the Warsh confirmation, he placed his glasses in his suit pocket, told reporters “I won’t see you next time,” and walked out.

His May 15 handover closes eight years as chair across the Trump and Biden administrations, a tenure that spanned the pandemic shock, the 2022 inflation spike and the most aggressive Fed tightening cycle since Paul Volcker. The 3.2 per cent core PCE print Powell read out at the lectern remains roughly 120 basis points above the Fed’s 2 per cent target. Whether the rate path he hands Warsh narrows that gap, or the new chair tilts the FOMC dovish under White House pressure, will define the first months of the post-Powell Fed.