Powell se despide sin retirarse, la estrategia de reducción de tasas de Trump podría fracasar

Original ｜Odaily Planet Daily (@OdailyChina)

Author｜Golem (@web3_golem)

Beijing time April 30th at 2 a.m., the Federal Open Market Committee announced the latest interest rate decision, deciding to keep the federal funds rate target range at 3.5%-3.75%. The Federal Reserve maintained interest rates as expected, but what unsettled the market was that 12 voting members participated in the vote, yet the decision was passed with a rare split of 8 to 4 votes, the most opposition since October 1992 to the Fed’s rate decision and policy statement.

Meanwhile, at the press conference after the rate announcement, current Fed Chair Powell stated that this was his last press conference as chair, but after his term ends (May 15), he will remain as a Fed board member, duration to be determined. (Odaily note: Powell’s Fed board term runs until January 2028)

The implications of this FOMC meeting are significant; on one hand, the rare 4 dissenting votes indicate an even more hawkish stance from the Fed, and on the other hand, Powell breaking the tradition of resigning from the board after his term ends also serves as a warning to Trump, thwarting his political pressure to cut rates.

Fed Hawkishness Deepens

According to the FOMC statement, among the 4 dissenting votes, Fed director Milan voted against maintaining rates, supporting a 25 basis point cut, as in previous votes. The remaining 3 dissenters—Cleveland Fed President Mester, Minneapolis Fed President Kashkari, and Dallas Fed President Logan—opposed including language in the monetary policy statement that suggested a “dovish tilt,” in other words, a more explicit signal of future rate cuts.

This rare internal disagreement stems from the US-Iran conflict causing a contraction in global oil supply, and the continued surge in crude oil prices could further exacerbate the already high inflation in the US. Powell also admitted at the press conference that there was intense debate within the committee, “the number of officials supporting a neutral bias has increased, and perhaps at the next meeting, a change in the current dovish stance will be considered.” He also emphasized that market overreacted to the dissenting votes, and opposition to maintaining a dovish stance in the statement does not mean officials favor rate hikes, “people are not saying we need to raise rates now, but rather discussing whether the Fed should remain neutral on policy outlook.”

However, the market generally believes that the publicized internal dissent indicates the Fed’s hawkish stance has deepened. Previously, the Fed viewed price increases caused by geopolitical events as “temporary shocks,” such as the impact of Trump’s tariffs in 2025 on trade and prices, which was judged as a “one-time price increase,” not preventing the eventual rate cuts.

This time, the Fed’s attitude toward oil price increases caused by the US-Iran conflict is shifting. The conflict has been ongoing for about two months, but so far, there has been no substantive progress in peace negotiations, the Strait of Hormuz remains under control, and oil prices stay high. Under these circumstances, more officials believe that high oil prices have shifted from short-term impacts to long-term persistent pressures, making their policy stance more cautious.

In the Fed’s statement, the language on inflation was also changed from “slightly elevated” to “elevated,” indicating increasing concern among officials about the potential pass-through effects of oil prices and overall price levels. While these comments and positions do not yet suggest the Fed will raise rates at the next meeting, they do signal that the difficulty of cutting rates is increasing. According to Odaily Seer’s monitoring, the probability on Polymarket that “the Fed will not cut rates in 2026” has risen from 38% to 57%, an increase of 19%.

However, some believe that the four dissenting votes at this FOMC may be deliberate, intended to warn the incoming Fed chair Waller that independence must be maintained, and not to blindly follow Trump’s political pressure to cut rates, or they will vote against.

Trump’s Political Pressure to Cut Rates Fails

Hours before this highly divided Fed meeting, the Senate Banking Committee had already advanced Waller’s nomination for Fed chair. Last Sunday, after the Justice Department concluded its investigation into Powell, Thom Tillis also shifted to support Waller, and the Senate Banking Committee approved the nomination with a party-line vote of 13 to 11, sending it to the full Senate.

With the key obstacle of Republican Senator Thom Tillis removed, Waller is highly likely to be confirmed by the Senate before Powell’s term ends. The Senate’s official schedule shows that from May 4 to May 8, the Senate is in recess, so the earliest voting window will be the week after the recess, starting around May 11. With the Republican-controlled Senate, as long as the schedule is approved smoothly, Waller’s confirmation could be completed between May 11 and May 15.

Although, even after confirmation, Waller will need to be officially appointed by the President (Odaily note: Waller is not a Fed director; he needs to first replace Milan’s seat), and sworn in, he still has time to preside over the June FOMC meeting, rather than Powell acting as interim chair. (Odaily note: In 2018, Powell was sworn in 13 days after confirmation, and his second term as chair from confirmation to swearing-in took 11 days)

Therefore, Trump happily stated today that now is a good time to cut rates, as his handpicked new Fed chair Waller is about to take over before the next FOMC meeting. Waller has also expressed dovish views multiple times. But what Trump did not expect was that even if Powell is no longer Fed chair, his sense of responsibility will still make him “find ways” to thwart Trump’s plans.

Powell said at the FOMC press conference that he will not be a “shadow chairman” and will give Waller full policy space. Powell’s reason for remaining on the Fed Board is to defend the Fed’s independence, he said, “the events of the past three months (Trump’s legal actions against Powell) left me no choice but to stay.”

Powell previously believed that Trump’s investigation into the costs of the Fed building renovation was an attempt to politically pressure him into cutting rates, but Powell ultimately did not let Trump succeed. Now, Waller is Trump’s chosen new chair, and they have a personal relationship, so Powell fears that Waller might follow Trump’s directives rather than objective facts, which is why he remains a board member—to prevent Trump from fully controlling the Fed.

Powell’s continued tenure indeed limits Trump’s ability to appoint loyalists to the Board. With Waller’s upcoming appointment, and three of the seven Fed directors nominated by Trump (the others being Bostic and Waller), if Powell resigns as chair and also steps down from the board, Trump would have the opportunity to appoint another director, giving him four out of seven.

Given the hawkish stance already shown by the Fed (notably, the three dissenters opposing dovish policy are all regional Fed presidents, not directors), even if Waller, a dove, takes office, the policy committee will remain highly resistant to rate cuts.

Thus, Trump’s ongoing political pressure on Powell and the Fed has so far not only failed but has strengthened the Fed’s resistance. For Trump, the best move now might be to quickly end the US-Iran conflict or open the Strait of Hormuz, lower oil prices, and create a plausible reason for Waller to persuade other officials to support rate cuts.