What we're covering here
• As expected: For the third time this year, the Federal Reserve said it is holding interest rates at their current range of 3.5% to 3.75%. However, four Fed officials dissented from the consensus, the most in 34 years.
• Last stand: Fed Chair Jerome Powell is finishing up his last few days as head of the US central bank, with his term expiring May 15. His press conference this afternoon marked his final appearance before reporters as Fed chair, he said, though he will stay on as governor for a brief period.
• Next in line: Kevin Warsh, who is President Donald Trump’s pick to succeed Powell, cleared a key hurdle Wednesday and his nomination now advances to the full Senate for final approval.
• Your move: The Fed has held pat on interest rates all year, citing uncertainty from the Trump administration’s policies and the conflict in the Middle East. Trump has said he expects his new chair to cut rates. But today’s 8-4 decision indicates that might be a challenge.
Our live coverage of the Federal Reserve’s latest policy decision and Fed Chair Jerome Powell’s final press conference has ended. Click here for more on this topic.
Stocks close mixed and yields climb after Powell delivers remarks
Stocks were mixed and Treasury yields rose Wednesday after the Federal Reserve held interest rates steady and Chair Jerome Powell discussed the Iran war’s impact on inflation and the economy.
The Dow closed lower by 280 points, or 0.57%. The S&P 500 fell 0.04%. The tech-heavy Nasdaq turned into the green and rose 0.04%, erasing earlier losses.
Investors are also processing earnings results from Amazon (AMZN), Alphabet (GOOG), Microsoft (MSFT) and Meta (META) after the closing bell on Wednesday.
To Matt Rowe, senior portfolio manager at Man Group, the most significant market reaction came in the bond market. Treasury yields climbed Wednesday as investors adjusted expectations for higher-for-longer interest rates.
“I think the market is telling you that … the inflation story is likely to persist into next year, and likely that means raising rates before cutting them,” Rowe said.
Brent crude surged more than 6% to settle at $118.03 per barrel, its second-highest settle during the war with Iran. Brent, after settling, briefly hit $120.27 per barrel, its highest level since 2022.
WTI, the US benchmark, surged nearly 7% to settle at $106.88 per barrel, its first settle above $100 per barrel in three weeks.
“Inflation is a real concern given the increase in global energy prices, hence the bar for cutting rates has risen meaningfully,” Luis Alvarado, co-head of global fixed income strategy at Wells Fargo Investment Institute, said in a note.
As it happened: CNN's expert analysis of Powell's final board meeting as Fed chair
A lot happened at today’s Federal Reserve monetary policy meeting. The Fed said it is holding interest rates at their current range of 3.5% to 3.75%. And Fed Chair Jerome Powell announced that he plans to step aside at the end of his term at the helm of the central bank. CNN’s team of experts followed along and weighed in. Read their analysis below:
A rare type of dissent happened at this meeting
Typically, when a dissenting vote is cast at a monetary policy meeting, it’s because a Federal Reserve official favors a different level of interest rates than the majority of voters. This meeting was different.
While we did still get one dissent on interest rates, three Fed officials cast dissenting votes regarding language the central bank used in its statement released at 2 p.m. ET.
Regional Fed bank presidents Beth Hammack, Neel Kashkari, and Lorie Logan “did not support inclusion of an easing bias.”
The statement the Fed releases at the end of a monetary policy meeting is meant to signal how officials view the current state of the economy and where they believe interest rates should be to best support it.
Rarely will you find a statement that point-blank says exactly what officials are going to do, since they themselves may not know. But the language in the statement can give hints.
There are "widespread concerns" about continued attacks on Fed independence, Powell says
Federal Reserve Chair Jerome Powell said he’s not the only central banker who is worried about continued legal attacks from the executive branch aimed at disrupting the institution’s ability to operate independently.
“There are widespread concerns these things may continue,” Powell told reporters Wednesday.
Powell added that Fed independence at its core means officials can “ignore political considerations completely.”
Powell ends his final press conference
“Thank you very much, everyone. I won’t see you next time,” Federal Reserve Chair Jerome Powell said Wednesday as he put his glasses in his suit pocket and walked out of his final press conference as head of the central bank.
There was brief applause from reporters as Powell exited, which he did swiftly, as usual, with no lingering.
This was Powell’s 66th press conference since he assumed the role in 2018. Two of those were emergency meetings held during the pandemic. During his eight years at the helm, the Fed’s rate-setting committee has raised the central bank’s key overnight lending rate 15 times and lowered it 11 times, according to Fed data.
Powell had little to say about how he wants to go down in history books. “I’m just going to say that’s for someone else to say,” he told reporters.
Fed policymakers are scheduled to convene for their next meeting on June 16-17, with Kevin Warsh all but assured to be at the head of the table — and Powell also present.
Hike, cut or hold? All options are on the table, Powell says
Federal Reserve Chair Jerome Powell told reporters on Wednesday that “nobody’s calling for a hike right now.” But that doesn’t mean it won’t happen.
“We really think our policy rate is in a good place. If we need to hike, we will certainly signal that and we will certainly do it. If we need to cut, then, if it’s appropriate to cut, we’ll signal the opposite,” he said.
Powell, like many of his colleagues, tends to steer clear of giving a definitive stance on where they believe rates should be in the future. That’s even more true in a situation like the one the United States is facing right now, with energy prices spiking due to the war with Iran.
Powell says he believes Warsh will uphold Fed independence
“I will take him at his word,” Federal Reserve Chair Jerome Powell said Wednesday when asked if he believes that Kevin Warsh, his likely successor at the helm of the central bank, will stand up to political pressure.
“I think I am confident as I said in my remarks that the Fed will continue to make its decisions based on analysis, rigorous analysis and not political considerations,” Powell said in a post-meeting press conference.
However, it hasn’t been a given during his own tenure, he noted: “We’ve had to fight for it. I’d like to think that, you know, we can get out of that era and go back to respecting what the law says and what custom has been.”
Powell said the institution has been “battered” by “legal assaults” from the administration. But he remained confident it could remain free of political interference under Warsh.
Mortgage rates have fallen for three straight weeks
Mortgage rates have been volatile for the last month as the war in Iran roils the bond market, but lately, home borrowing rates have been on a downward trajectory.
The average 30-year fixed mortgage rate fell to 6.23% last week, according to Freddie Mac. Earlier this month, it jumped as high as 6.46%.
Rates tend to follow the 10-year Treasury yield, which has been volatile as bond traders weigh whether the conflict in the Middle East and a surge in oil prices could stoke inflation.
But the recent fall in mortgage rates may be welcome news for those hoping to buy or sell a home this spring.
Lower mortgage rates may help unlock more inventory, as homeowners with ultra-low pandemic-era loans may be more willing to give up their cheap monthly payments.
Just over 60% of mortgage holders still had a mortgage rate under 5% as of March, according to internal data from Rocket Mortgage’s clients.
Powell says he and Warsh dined together in January
Federal Reserve Chair Jerome Powell said he dined with his likely successor, Kevin Warsh, in January after President Donald Trump announced his nomination.
“I congratulated him,” Powell said, noting that they haven’t crossed paths in person since. It’s unclear if anyone else was at the dinner.
Powell underscored Wednesday that he intends to provide as seamless a transition to Warsh as possible. “I think this is and will be a very normal, standard kind of transition process.”
Powell confirms he will stay on the Fed board after he steps down as chair
Federal Reserve Chair Jerome Powell confirmed Wednesday that he will be stepping aside as central bank leader next month but intends to continue his concurrent term as a governor, which extends until 2028.
Powell will become the first outgoing Fed chair to remain on the Fed’s board since Marriner Eccles in 1948.
“This is my last press conference as chair,” Powell said Wednesday, “and I will close with a few thoughts.”
“First, I want to congratulate Kevin Warsh on his advancement out of the Senate Banking Committee this morning. This is an important step forward and I wish him well as that process continues.”
Responding to a question from a reporter about his decision to stay “for a period of time” after his tenure as chair ends on May 15, Powell cited “the series of legal attacks on the Fed which threaten our ability to conduct monetary policy without considering political factors.”
“I had long planned to be retiring,” he noted. “The things that have happened really in the last three months have, I think, left me no choice but to stay until I see them through.”
Last week, Jeanine Pirro, the US attorney for the District of Columbia, said she was dropping a criminal investigation into Powell tied to costly renovations at the Fed’s Washington, DC, headquarters. But, Powell noted Wednesday, Pirro said “she would not hesitate to restart the investigation.”
That probe, which Powell in January strongly rebuked as politicized, stoked fears that the Trump administration was trying to chip away at the Fed’s independence, which would pave the way for political interference in setting interest rates for the world’s largest economy.
“I’ve said that I will not leave the board until this investigation is well and truly over with transparency and finality and I stand by that,” he said.
As governor, Powell says he won’t butt in. Addressing questions about the next meeting, Powell said he’d leave that up to the future leaders of the Fed.
“I plan to keep a low profile as a governor. There’s only ever one chair of the Federal Reserve Board. When Kevin Warsh is confirmed and sworn in he will be that chair.”
Stocks dip, yields rise after Fed holds rates steady
US stocks slightly extended losses after the Federal Reserve announced it held interest rates steady, matching expectations.
The Dow was down 422 points, or 0.86%. The S&P 500 fell 0.4%, and the Nasdaq Composite fell 0.45%.
“Inflation is elevated, in part reflecting the recent increase in global energy prices,” the Fed said in a statement.
Treasury yields ticked higher: The two-year yield, which is sensitive to the outlook for Fed rates, moved higher, to 3.94% and hit its highest level in a month.
The 10-year yield, which is sensitive to the outlook for inflation, rose to 4.42%, also its highest level in a month.
The US dollar index rose 0.3%. Expectations for higher-for-longer interest rates can support the dollar.
Traders’ focus now turns to Federal Reserve Chair Jerome Powell’s remarks at a 2:30 p.m. ET press conference.
Dissents underscore difficulty for next Fed chair to lower rates
While Kevin Warsh, President Donald Trump’s nominee to succeed Federal Reserve Chair Jerome Powell, may favor lower rates, there currently isn’t a convincing economic argument for easier monetary policy anytime soon – a view that three key Fed voters telegraphed at this meeting.
The decision to hold steady was nearly unanimous, with only Fed Governor Stephen Miran casting a dissenting vote in favor of lower rates than the majority wants for the sixth consecutive meeting.
But Fed presidents Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas “did not support inclusion of an easing bias in the statement at this time.”
Their dissents underscore how difficult it will be for Warsh, if he’s confirmed, to persuade the majority of the Fed’s 12-person rate-setting committee to go along with lower rates. While the Fed chair wields considerable influence, controlling the agenda for every Fed meeting, they have only one vote in a committee that makes consensus-based decisions.
It is the first time since October 1992 that there have been four dissents of any kind.
Fed holds interest rates steady for third time this year
The Federal Reserve on Wednesday kept interest rates unchanged for a third consecutive meeting, with some policymakers citing still-elevated energy prices due to the US-Israeli war with Iran.
Fed officials kept the benchmark lending rate in a range of 3.5-3.75%, in what is expected to be Jerome Powell’s final meeting as chair before his term ends on May 15.
Kevin Warsh, President Donald Trump’s nominee to succeed Powell, is widely expected to favor additional rate cuts this year.
Warsh continues to deny involvement with Jeffrey Epstein
Kevin Warsh, President Donald Trump’s pick to succeed Federal Reserve Chair Jerome Powell, continues to deny any ties with disgraced financier and convicted sex offender Jeffrey Epstein.
“I don’t know these people, I did not attend any of their events, nor am I aware of having ever attended an event at which these people were present,” Warsh stated in response to questions posed by Massachusetts Sen. Elizabeth Warren, who penned a letter to the Fed nominee last month demanding more details about the extent of his relationship with Epstein.
Emails sent to or from an account associated with Epstein released by the Department of Justice suggest Warsh and his wife, Jane Lauder, were invited to events Epstein helped organize.
One was in St. Barthélemy around Christmas in 2010; another was a dinner in New York. The guest list for the dinner includes Epstein, Warsh, Lauder, Trump and his wife Melania, and some of the president’s children.
It’s unclear from the batch of email exchanges released in January who attended the events. Trump has consistently denied any wrongdoing and being mentioned in the files is not an indication of that.
Why Elizabeth Warren called Warsh a "sock puppet" — and what he said in response
Last week in his initial Federal Reserve chair Senate confirmation hearing, Democratic Sen. Elizabeth Warren labeled Kevin Warsh a “sock puppet” of President Donald Trump.
The label, she said, stemmed from Trump’s recent comment that he believed interest rates would be lower “when Kevin gets in.”
Trump has not been shy about his desire for the Fed to lower interest rates and he wants to exert greater control over the independent central bank. But Fed Chair Jerome Powell has stood firm by the bank’s policy to keep politicians’ views out of interest rate decisions, drawing the ire of Trump.
That has led many to believe that Trump’s pick to replace Powell would be more accommodating of the president’s demands. But Warsh told senators last week that wouldn’t be the case.
Asked by a Republican senator later if he’d be the president’s “human sock puppet,” Warsh responded, “Senator, absolutely not.” He also vowed to be “an independent actor, if confirmed.” However, he was unwilling to state whether or not Trump won the 2020 election.
Tillis slams Warren's insistence that investigation into Powell isn't over as an "insult"
Sen. Thom Tillis told CNN that he was insulted by Sen. Elizabeth Warren’s insistence that the investigation into Federal Reserve Chair Jerome Powell isn’t over, after Tillis said he was assured by the Justice Department that it was ending.
Tillis had refused to join his GOP colleagues in advancing Trump’s Fed chair nominee, Kevin Warsh, until the investigation into Powell ended.
“Sen. Warren did nothing but a political stump speech in there. She does not know anything about this. I do because I spent hours with the DOJ negotiating this, and I’m fine, but call it what it is: it’s political theater, not based on fact,” said Tillis.
He continued, “And that’s an insult to me. She’s basically saying what I decided was okay to go forward with was all bogus. She wasn’t in those discussions. She didn’t get the assurances that I did.”
Warren maintained that “a vote to advance Donald Trump’s Fed nominee is a vote to help Donald Trump take over the Fed. We should not be advancing Kevin Warsh today,” before the Senate Banking Committee meeting where the panel approved his nomination.
She maintained to reporters that the investigation into Powell “has not been dropped.”
The Fed under Warsh might not meet eight times a year any more
President Donald Trump’s nominee to lead the Federal Reserve expressed a willingness last week to consider holding fewer monetary policy meetings, a break from a nearly 50-year practice.
Since the 1980s, the Fed has held eight meetings a year, occurring roughly every six weeks, to vote on the appropriate level of interest rates. By law, though, central bankers are only required to have four such meetings.
Warsh told senators on the banking committee during his confirmation hearing last week that “four (meetings) is not enough, so having more meetings than that is appropriate.” At the same time, he didn’t commit to holding eight meetings a year.
He did, however, seem to agree to hold post-meeting press conferences. “If a press conference were held, I think it would be incumbent to hear what the reporters of the day had in mind,” Warsh said.
Bringing down rates isn't going to be easy
Kevin Warsh, President Donald Trump’s pick to lead the Federal Reserve, is now firmly on track to assume one of the most powerful positions in the global economy — and could advance an agenda that aligns with Trump’s desire for lower rates.
Still, even with Warsh at the helm, it won’t be easy to push interest rates meaningfully lower, something the president has made clear he wants, even joking that he would sue Warsh if he doesn’t cut rates.
That’s because Fed officials typically lower borrowing costs only if inflation is slowing, unemployment is rising (and at risk of climbing higher), or a combination of the two — neither of which is happening.
And since the Fed chair is just one vote on the 12-person rate-setting committee, Warsh would be unlikely to build consensus for a rate cut.
“Warsh is in the unfortunate position, through no fault of his own, to probably be the least influential Fed chair in a long time,” Christopher Hodge, chief US economist at Natixis CIB, told CNN. “He’s going to have a really hard time convincing the other members of the (Fed’s rate-setting committe) to cut rates quickly.”
Here’s what Wall Street expects from the Fed
Stocks were slightly lower Wednesday ahead of the Federal Reserve’s decision on interest rates.
The Dow was down 268 points, or 0.55%. The S&P 500 and Nasdaq each fell 0.1%.
Here’s what economists and investors expect from the Fed and Chair Jerome Powell this afternoon:
- “With uncertainty still pervasive, we expect [Powell] will emphasize that officials are unsure of the precise fallout from the war on the economy and monetary policy.” — Matthew Luzzetti, chief US economist at Deutsche Bank. “However, Powell could highlight that persistent price pressures become more likely the longer oil prices remain elevated.”
- “Energy prices shot up in March, which at the margin will be negative for growth and employment and a boost to inflation, exacerbating the two conflicting risks that were already the focus of policymakers.” — Stephen Stanley, chief US economist at Santander US Capital Markets. “The easy thing to do for the [Fed] is to simply move to the sidelines for a time and wait for events to play out.”
- “Markets will be watching closely for any signal from Chair Powell regarding whether he intends to remain on the Committee following the confirmation of his successor, as that could shape expectations around policy continuity.” — Chris Brigati, chief investment officer at SWBC.
