Powell’s final FOMC minutes: continuing to serve as a Federal Reserve governor—an unprecedented split within the Federal Reserve

April 29 (early morning April 30 Beijing time), Powell, in his capacity as Chair of the Federal Reserve, presided over his final FOMC meeting and press conference. The interest rate was kept in the 3.5% to 3.75% range, with 4 dissenting votes. This is the first time since October 1992 that such a number of dissenting votes has appeared in a single Federal Reserve meeting.

The two-hour meeting covered the interest rate decision, inflation assessments, statements on independence, personnel arrangements, and a summary of his eight-year term. This article compiles Powell’s key positions from his opening remarks and his Q&A with reporters.

Regarding this rate decision

The FOMC decided to keep the target range for the federal funds rate at 3.5% to 3.75%, marking the third consecutive pause through 2026. In his opening statement, Powell said that since the fourth quarter of last year, the committee has cumulatively cut rates by 75 basis points, and the current policy stance is considered sufficient to support both ends of the dual mandate—maximum employment and the 2% inflation target.

But the real highlight of this meeting was not the rate itself, but the 4 dissenting votes. This is the highest number of dissenting votes in a single FOMC meeting since October 1992. In his Q&A, Powell confirmed that 3 of the votes were directed at the wording of the statement rather than the rate decision itself. Three members believed the language of “easing bias” should no longer be retained and should be replaced with a neutral stance—meaning the chances of rate hikes and cuts are equal. All three dissenters agreed to keep the current interest rate unchanged; the disagreement was only over the wording in the statement.

Powell acknowledged that the number of committee members supporting a change in language has increased significantly compared with the March meeting, saying that this discussion is “completely reasonable.” However, he personally opposed adjusting the guidance at this meeting, because there is no need to rush to make a decision now—conditions could change significantly in the next 30 to 60 days or even by the next meeting. The next FOMC will be held on June 16 to 17, which will be the first meeting that could be chaired by Waller, and it also means that whether to keep or remove the “easing bias” wording will almost certainly be decided by the new Chair.

Regarding the level of the neutral rate, Powell judged that the current interest rate level is already close to the higher end of the neutral range. He has long personally believed that the neutral rate lies between 3% and 4%, and that it is currently slightly above 3.5%, placing it toward the upper end of the range he considers reasonable. This means policy is no longer clearly restrictive; it may be slightly tight or neutral, with room to hike or cut. The market’s interpretation of the Fed’s reaction function is broadly consistent with his statement.

Regarding the inflation assessment

In his opening remarks, Powell said that in March, total PCE rose 3.5% year over year. This was mainly due to a significant increase in global oil prices driven by the conflict in the Middle East. Excluding the food and energy categories, which tend to be more volatile, core PCE rose 3.2% year over year. Powell believes this largely reflects the impact of tariffs on prices in the goods sector. Short-term inflation expectation indicators have risen since the beginning of this year, mainly because oil prices have surged sharply; however, most long-term expectation indicators remain consistent with the 2% inflation target.

When describing inflation conditions, Powell used a less common word: “misbehaving.” He mentioned multiple times that although the core inflation rate is small in magnitude, it is moving in the wrong direction—this is the judgment he repeatedly returned to throughout this meeting.

Oil prices are a variable that was mentioned again and again during this meeting. A reporter in attendance noted that Brent crude is currently approaching $120 per barrel. Powell said the Fed’s usual practice is to look through temporary energy shocks, because oil prices often reverse, and monetary policy is affected by long and varying lags, so there is no need to respond immediately. But given that inflation has remained persistently above 2% over the past few years, and that the Fed has already been looking through the impact of tariffs, its tolerance for “looking through” energy shocks is smaller. Powell believes they need to see oil prices fall and progress on tariffs before the Fed would consider cutting rates. Whether the Strait is closed and for how long is an unpredictable variable.

Supporting this caution is also a historical framework. Powell said the U.S. economy has actually experienced four supply shocks: the pandemic, the Russia-Ukraine conflict, tariffs, and the Iran crisis. Each supply shock has the ability to raise both inflation and unemployment at the same time, making it difficult for central banks to know what to do. This is Powell’s fundamental explanation for the current policy dilemma, and it is the core framework through which he understands differences in views inside the committee.

Regarding the overall state of the economy

Powell’s overall assessment of the current state of the U.S. economy can be summarized in a single sentence. Given all these headwinds, it is very resilient. He said, “It can actually be said to be quite resilient.”

There are two main supports. First, consumer spending has remained fairly strong; the latest data are encouraging, and consumption in retail sales, credit card data, and banking data still looks steady. Second, business investment has continued, especially data center construction. Powell specifically mentioned that there is virtually never-ending demand for data centers across the United States, that substantial capital is being poured into this area, and that there is reason to believe it will continue. Powell believes a better indicator of economic momentum is domestic private final demand (PDFP), and this figure is even higher than overall GDP growth, meaning the economy is growing at 2% or faster.

But behind the unemployment rate of 4.3% there is a less comfortable reality. Powell acknowledged that from the perspective of job seekers, this figure does not necessarily indicate a benign labor market. Both the quit rate and the hiring rate are low, with no actual net job creation. The labor market is in an “unusual and uncomfortable” balance. People who do not have jobs find it hard to enter the workforce unless someone quits. Other indicators, including job openings, layoffs, hiring, and nominal wage growth, have changed little overall in recent months.

On the assessment of how the Iran conflict drags on other areas of the economy, Powell’s view is that they have not yet seen it. He acknowledged that if gasoline prices rise significantly again, logically it would take money from people’s pockets that could be used for other spending, thereby affecting other consumption—but they have not yet observed this transmission. He emphasized that, unlike the U.S. West European or Asian counterparts, the U.S. is a net oil exporter, and the economy is no longer as energy-intensive as it was in the 1970s, so the drag from this conflict on the U.S. economy is relatively small; the import sector accounts for only 10% of the U.S. economy.

Regarding Federal Reserve independence

This was the heaviest topic of the entire press conference, and it is also what Powell repeatedly emphasized in both his opening remarks and in the Q&A.

Powell’s core concern is the level of legal attacks the Fed is facing. He said that the real worry is a series of legal attacks against the Fed, which threatens the Fed’s ability to conduct monetary policy without taking political factors into account. He believes that the legal actions taken by this administration are unprecedented in the Fed’s 113-year history. Powell specifically distinguished between elected officials’ “verbal criticisms” and “legal actions.” He never thought verbal criticism is the problem, but legal actions are another matter, and there remains an ongoing threat of more such actions.

When discussing the roots of independence, Powell said that it is “to a large extent the law,” but he also acknowledged that the Fed has had to go to court to successfully defend it, and while there has been progress, it is far from over. He emphasized that behind independence there are also a series of customs, as well as the lines between the Fed and the government—between the Fed and the Treasury—that must be respected. Each administration watches the Fed’s tools, hoping to repurpose them for other purposes, but doing so would pull the Fed into politics and fiscal policy. Powell said the Fed has resisted this well.

Regarding the comments by Governor Waller about the firing of presidents of reserve banks, Powell’s remarks were the most significant part of the entire press conference. Waller’s most recent speech opposed the idea that the government should dismiss reserve bank presidents based on differences in monetary policy views. Powell strongly agreed with Waller’s position. He said that if each administration could step in and do this, it would mark the beginning of the end of the Fed’s ability to set monetary policy independently—at that point, the Fed would simply be another cabinet agency. Powell made it clear that he would not support such actions.

When asked whether the current independence is as strong as it was when he first took office, Powell acknowledged that it is currently at risk. He hopes to get through this era and return to a track that respects laws and customs, so that the Fed can do what it is supposed to do. Powell said he believes the Fed will continue to make decisions based on rigorous analysis rather than political considerations, but that requires advocacy. He also acknowledged that many people are worried these issues may continue, which would be a problem.

Regarding Powell’s decision to remain on the Board

In the tail end of his opening remarks, Powell announced the most important personnel update from this meeting: after stepping down as Chair on May 15, he will continue to serve as a Board member, with the term “to be determined.” He will keep a low profile during his time as a Board member.

The core reason for his remaining is the independence threat mentioned above. Powell said he originally planned to retire, but the events that have occurred over the past three months left him with no choice but to stay until he sees these matters come to an end. Specifically, although the Department of Justice withdrew the case last Friday, Powell noted that the withdrawal statement included a line saying “if needed, she will not hesitate to restart the investigation.” Over the weekend, the Department of Justice provided limited assurances that the investigation would not be restarted unless there is a criminal referral from the Fed’s inspector general. But Powell said he will not leave the Board until the investigation is completely conducted, transparently conducted, and ultimately concluded. That is why he cannot leave now.

As for whether he might become a “shadow Chair,” Powell repeatedly and clearly denied it. He said he would return to his capacity as a Board member and respect the role of the Chair. He described his future positioning using his experience as a Board member for six years: he understands how difficult it is to reach consensus among 19 people with strong opinions, so he will strive to be a constructive participant and will not unnecessarily increase the Chair’s difficulties. “Support the Chair when you can, and when you can’t, you can’t.”

When asked whether his decision to remain is a form of political check and whether it deprives Trump of a majority seat that he could have obtained if he resigned, Powell said he thinks it’s absolutely not. He emphasized that he is staying because of the legal actions that have already taken place. He has served nearly six years as a Board member, understands what role a Chair who is about to step down should play, and his intention is not to interfere. Powell acknowledged that he hopes to see things calm down, and to have the Fed return to a traditional model of respecting laws and customs. He stressed that his decision will be guided entirely by “what I believe is in the best interest of the institution and the people we serve.”

Regarding the communication framework and the dot plot

During last year’s review of the communication framework, Powell personally wanted to push for some reforms. But he admitted at the press conference that making truly major changes to the dot plot or SEP (Summary of Economic Projections) cannot win broad support within the committee, so he gave up. Powell’s personal stance is that he has never been the biggest fan of the dot plot, but without a better alternative, he is unable to beat the existing system. He said it is very natural that every new Chair will review communication tools and think about what changes can be made.

Regarding whether Waller might adjust the way communication is handled, Powell’s stance is an open endorsement. He said it is very healthy for each new Chair to review communication approaches. Communication itself is very complex, and you always can focus on new things. If Waller adjusts the communication tools, Powell’s assessment is “completely appropriate.” This was his response when asked for any suggestions to Waller regarding his communication tools: he would not advise Waller through reporters, but for each new Chair to review communication methods is both healthy and appropriate.

But regarding the practice of holding a press conference after each meeting, Powell himself still believes it should be retained. His reason is that it is very helpful to convey the committee’s message directly, rather than letting the other 18 people go out and speak on their own—that would become extremely chaotic. There are major differences in views within the Federal Reserve Board. He acknowledged that he does not know whether Waller must keep this approach, but people have gotten used to it.

As for the fact that the Fed is the only major central bank that does not publish forecasts, Powell explained that this is because with a 19-person committee, it is difficult to reach consensus on forecasts. But he believes there is nothing wrong with the Fed’s communication itself, and using different, better ways to do it is the most natural thing in the world.

Regarding Waller’s transition

In his opening remarks, Powell congratulated Waller on his successful progression through the Senate Banking Committee this morning, calling it an important step forward, and wished him all the best for the subsequent procedures.

But unlike the transition with Yellen. Powell said he and Yellen worked together for six years, and their offices were on the same hallway—an entirely different transition. He met Waller only once, at a dinner in January, and has not seen him since. This is the detail he mentioned proactively. Powell said he does not know what the normal procedures are, but he believes this will be a very normal, standard transition process, which is what he expects.

On whether Waller can withstand political pressure from the President, Powell’s response was measured. He said Waller testified very strongly at the hearing, and he will believe what Waller said.

When asked whether he is concerned that the Fed’s credibility is under pressure, and whether this is one of the reasons he wants to stay, Powell said that credibility is not the main driver of his thinking right now. Monetary policy is made jointly by 19 people, and there is a lot of stability there. Every new Chair faces the same situation: 18 FOMC colleagues, 11 of whom have voting rights, and the need to build consensus. He assessed that Waller is very capable in this regard, with the skill to do this well.

Regarding the eight-year term

When asked about the legacy of his term, Powell’s answer was, “That will be for others to judge.”

But he summarized the backdrop of the past six years of his tenure in a single paragraph. He said that it is very different from the long-standing situation in the past. In the past, the Fed and other central banks managed demand, and inflation stayed very low for 25 years. Now it is a very different and more challenging world, requiring a balance between both ends of the dual mandate. All central banks with an inflation mandate must do the same.

When asked whether the 2020 new framework’s focus on employment will make future Chairs less willing to pursue a hot labor market, Powell did not think so. He said the pandemic-driven inflation should not be blamed on the Fed’s focus on employment. He said it was a global shock involving economic shutdowns, reopenings, stimulus policies, and so on. If you look at the charts of ten large economies, it is impossible to tell which one is the U.S., which is Germany, and which is France. He believes this view should not be held responsible for high inflation. Powell acknowledged that during the pandemic recovery, the labor market was overheated and tight, but it is no longer the root cause of inflation.

To American families who feel that inflation has not been under control since the pandemic, Powell said the Fed is committed to sustainably bringing inflation down to 2%. This is a commitment—a commitment that is endless and unwavering. He acknowledged that these events that push up costs keep happening, but the best the Fed can do is use its tools to steer inflation back to 2%. Trying to achieve this target too quickly could impose huge costs, such as unemployment, so the Fed aims to reach this goal in a way that minimizes disruption over time.

When asked about the decisions he is proud of during his term, Powell said that at this point it is difficult to single out individual things. He and his colleagues have always insisted on making the best decisions they believe for the American people, based on the tools and goals given by Congress. This is very challenging, especially since for more than six years the economy has been in a state of supply shocks. He is very proud of the work he and his colleagues have done over these years.

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