US Fed holds rates in Jerome Powell's likely last meeting as Chair amid rising inflation and rare internal split

A divided Federal Reserve kept interest rates unchanged for the third consecutive meeting on Wednesday (April 29), citing uncertainty driven by the Middle East conflict. The decision, made under Chair Jerome Powell, may mark his final meeting as the central bank's leader. "Inflation is elevated, in part reflecting the recent increase in global energy prices," the Fed said. Rates remain in the 3.50% to 3.75% range. However, dissent was notable; four of 12 voting members opposed the decision. Stephen Miran pushed for a quarter-point rate cut, while Beth Hammack, Neel Kashkari, and Lorie Logan supported holding rates but rejected the Fed’s signal toward future cuts. This marks the highest level of dissent since 1992, highlighting growing divisions within the central bank.

The Fed had been gradually cutting rates since late last year, but the ongoing US-Israel conflict involving Iran has increased energy costs and disrupted supply chains. Analysts now warn inflation risks could shift policy back toward rate hikes. The decision comes during a volatile economic period. Donald Trump has repeatedly criticized Powell for not cutting rates faster. Powell is also expected to address whether he will remain on the board after his term as chair ends on May 15. Meanwhile, Trump’s nominee for Fed chair, Kevin Warsh, moved closer to confirmation after the Senate Banking Committee approved his nomination.

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Democrats, including Elizabeth Warren, warned the move could undermine Fed independence, while Raphael Warnock cited "persistent threats" from Trump toward the central bank. Trump has also targeted Fed officials, including Lisa Cook, and backed a Justice Department probe into the Fed, later dropped, raising concerns about political interference.

Despite pressure, Powell has pledged transparency and may remain on the board until 2028. Analysts suggest his continued presence could stabilize the institution during the leadership transition. The Fed continues to balance its dual mandate—controlling inflation and supporting employment—as rising energy costs threaten both price stability and economic growth.