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Jerome Powell's final press conference as Chairman of the US Federal Reserve revealed critical signals that will determine not only short-term interest rate expectations but also the global macroeconomic direction. The statements indicate a period of cautious, data-driven waiting, rather than a clear easing of monetary policy.
One of Powell's most notable messages was that the conditions for an interest rate cut are not yet right. He stated that rising energy prices and cost pressures stemming from trade policies have not yet peaked, emphasizing that the effects of these two main shocks need to be clearly observed. This approach is causing expectations of short-term interest rate cuts to be postponed.
Conversely, a more critical factor for the market is that an interest rate increase has re-emerged as a possibility. The convergence of the probabilities of both interest rate cuts and increases among Fed officials indicates that the policy direction is not yet finalized. This situation increases the upside risks, particularly in long-term interest rate expectations.
Powell described the current interest rate level as "slightly restrictive, close to the upper limit of the neutral level," stating that they aim to keep inflation under control without suppressing economic activity. This search for balance reveals that the Fed is pursuing a flexible policy framework, avoiding aggressive steps.
In terms of macro risks, the most important emphasis has been on the possibility of stagflation. Powell explicitly stated that supply-side shocks could simultaneously increase both inflation and unemployment. This assessment points to one of the most challenging scenarios for policymakers.
Looking at inflation data, core PCE is at 3.2%, while headline inflation is at 3.5%. While short-term inflation expectations are rising, long-term expectations remain stable around 2%, creating limited room for confidence for the Fed. However, Powell specifically emphasized that the possibility of a renewed rise in core inflation should not be ignored.
Assessments regarding the labor market are also noteworthy. It has been stated that the pace of employment growth has slowed, labor demand has weakened significantly, and job turnover rates remain low. While the unemployment rate appears stable, this is attributed to a slowdown in labor force participation. This picture is considered an early sign of an economic slowdown.
Energy markets are also on the Fed's radar. High oil prices and the continued geopolitical risks in the Strait of Hormuz are putting upward pressure on inflation. Powell stated that the US is less affected by this impact compared to Europe and Asia, but this advantage could disappear if the process continues.
Regarding trade policies, Powell continues to view the impact of tariffs on inflation as a temporary price shock. However, his acknowledgment of high uncertainty indicates that this view is not definitive. The next two quarters stand out as a critical period to determine whether this effect is permanent.
Another noteworthy element in monetary policy communication is that the last meeting was marked by much more intense discussions compared to previous periods. While the possibility of a change in forward guidance has been raised, it has been stated that the next 30 to 60 days will be decisive.
From an institutional perspective, risks to the Fed's independence have been explicitly mentioned. Powell stated that the central bank is forced to defend itself against political pressures at the legal level, emphasizing that the independence of monetary policy is at a more critical juncture than ever before.
In conclusion, Powell's latest press conference points to a period where expectations for interest rate cuts are weakening, inflation risks persist, and signals of an economic slowdown are strengthening. In this new period, the direction of monetary policy will be determined by energy prices, global geopolitical developments, and the real impact of trade policies on inflation. The most critical factor for markets in this process will be how uncertainties are resolved and to what extent the Fed will maintain its data-driven approach.
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The Federal Reserve (FED) kept the federal funds rate unchanged at 3.50-3.75% at its April 2026 meeting, as expected. This marks the third consecutive time interest rates have remained unchanged since the beginning of the year. However, the meeting, which began with routine expectations, concluded in a way rarely seen in the FED's recent history. The wording of the decision and the distribution of votes revealed a deepening of internal divisions within the institution. Global markets began to interpret this decision as a turning point where a "dovish" stance clashed with a "hawkish" reality.
Historic Opposition: An 8-4 Divide
The most striking outcome of the meeting was the Federal Open Market Committee's (FOMC) decision, which was decided by an 8-4 vote. This was the highest number of dissenting votes recorded at a FED meeting since 1992. A closer look at the votes reveals a multi-layered policy rift rather than just a disagreement. Federal Reserve Governor Stephen Miran, a former economic advisor to President Trump, stood alone on the "dovish" side, arguing for a 25 basis point cut. In contrast, Cleveland, Minneapolis, and Dallas regional Fed presidents Beth Hammack, Neel Kashkari, and Lorie Logan voted against keeping interest rates unchanged, but opposed any reference to "additional adjustments" in the policy statement. This opposition points to the rise of "super hawks" who believe that even the slightest hint of automatic interest rate cuts in the statement should be absent.
Energy Shock and Concerns about Sticky Inflation
The underlying reason for this strong opposition was the changing inflation outlook. The FOMC, in its official statement, changed its previously used phrase "somewhat elevated," emphasizing that inflation is directly "elevated." This terminological hardening was attributed to the shock to energy costs caused by tensions with Iran and conflicts in the Middle East. Global oil prices hovering above $100 per barrel and the sharp jump of over 7% in Brent crude on the day of the decision are rapidly pushing headline inflation upwards. The rise in US CPI to 3.3% in March, and the risk of April's leading indicators pushing this rate towards 3.6%, seriously undermined the Fed's belief in the disinflation process. In particular, the possibility of the increase in energy costs spreading to other items through secondary effects necessitated a cautious stance in monetary policy.
Emphasis on Uncertainty as We Enter the Post-Powell Era
Another notable revision in the decision text was the strengthening of the emphasis on "high uncertainty" regarding the economic outlook. The Fed confirmed that developments in the Middle East are complicating not only inflation but also growth and employment balances. This meeting is likely the last FOMC meeting under the leadership of Chairman Jerome Powell. President Trump's nominee, Kevin Warsh, is expected to take over in mid-May after receiving confirmation from the Senate Banking Committee. This leadership transition effectively limits Powell's ability to provide forward guidance and increases strategic uncertainty within the institution.
Conclusion: Data-Driven and Cautious Stance Maintained
Despite strong economic growth (growth continues at a "solid pace") and modest job growth, the Fed remains a clear priority for price stability. The decision statement maintained the message that no interest rate cuts will occur without carefully considering "incoming data, the changing outlook, and the balance of risks." For the markets, this decision confirms that hopes for an early rate cut have been completely dashed and that uncertainty for the second half of the year has increased. How the new Fed, under Warsh's leadership, will manage these deep internal divisions and how it will combat energy-related inflation will remain the most critical economic issue for the coming period.
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