The Federal Reserve left its benchmark interest rate unchanged for a third straight meeting Wednesday but signaled it could still cut rates in the coming months, moves that attracted the most dissents since October 1992.
The Fed kept its short-term rate at 3.6% and retained language in its statement suggesting the next move would be a rate reduction. Three officials dissented in favor of removing the reference to a future cut, while a fourth, Stephen Miran, dissented in favor of an immediate rate cut.
The dissents underscore the level of division on the Fed’s 12-member rate-setting committee ahead of the departure of Chair Jerome Powell, whose term ends May 15.
The Senate Banking Committee approved his successor, Trump appointee Kevin Warsh, earlier Wednesday on a party-line vote. Warsh has argued in favor of rate cuts, as Trump has demanded.
“Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook,” the Fed said in a statement after its two-day meeting. “Inflation is elevated, in part reflecting the recent increase in global energy prices.”
Warsh has promised “regime change” at the central bank and may make sweeping changes to its economic models, communications strategies, and balance sheet, but he will likely find it harder to implement the rate cut s Trump seeks with inflation topping 3%, above the Fed’s target of 2%.
The three officials who dissented against hinting that the Fed may reduce borrowing costs were Beth Hammack, president of the Federal Reserve Bank of Cleveland; Neel Kashkari, president of the Minneapolis Fed; and Lorie Logan, president of the Dallas Fed.
Miran was appointed to the Fed’s Washington board by Trump last September. The regional Fed bank presidents have historically been more likely to dissent, while the Washington-based governors more often support the chair.
The dissents could renew tension between the Trump administration and the bank presidents, who White House officials have previously criticized.
Powell likely has presided over his last meeting as chair and will hold a news conference Wednesday afternoon, when he may say whether he will take the unusual step of remaining on the central bank’s board of governors, even after his term as chair ends May 15. Powell serves a separate term as a governor that lasts until January 2028. Chairs typically leave the board when their leadership terms end, but Powell has signaled he could remain. He would be the first chair to do so since 1948.
If Powell, who has made protecting Fed independence a key part of his legacy, chooses to stay, he would deprive Trump of the opportunity to pick his replacement and fill another seat on the Fed’s seven-member board. Three of the seven current governors are Trump appointees.
At the same time, it could worsen tensions with the Trump administration and would create what some analysts refer to as a “two Popes” scenario, with a chair and former chair both on the Fed’s board. In that case, divisions among policymakers could increase, if some decided to follow Powell’s lead rather than Warsh’s.
The leadership turmoil comes while the economy remains unusually murky, putting the Fed in a difficult spot. Inflation has jumped to 3.3%, a two-year high, as the war has sharply raised gas prices. That makes it harder for the central bank to reduce rates. The Fed typically leaves rates unchanged, or even raises them, if inflation is worsening.
At the same time, hiring has ground almost to a halt, leaving those without jobs frustrated by the difficulty of finding new ones. Typically, the Fed cuts rates when the job market is weak, to spur more spending and job gains.
But layoffs also remain low, as employers appear to be following a “ low-hire, low-fire ” strategy. Many Fed officials have suggested that as long as the unemployment rate is low, the central bank doesn’t need to cut rates to spur more spending and hiring. Unemployment declined to 4.3% in March, from 4.4%.
