Jerome Powell has two formal opportunities left to move interest rates before the end of his term at the helm of the Federal Reserve. He may not need either of them.
By holding rates unchanged this week, the Fed sent a deliberately sober, almost stubbornly restrained message. Powell spoke of a “clear improvement” in the US outlook and pointed to a labour market that is no longer deteriorating, but settling. After three rate cuts last autumn, policymakers see no urgent reason to cut rates further. Futures markets agree: no move is expected before June.
By then, Powell’s mandate as chair will be over. A successor will likely be in place, ushering in a very different phase of monetary leadership under Donald Trump. The White House campaign for lower rates has already reshaped the Fed’s internal dynamics. This week’s vote offered a preview of what may come next: the only two dissenters calling for an immediate cut were Stephen Miran, currently on leave from his role as a senior Trump adviser, and Christopher Waller, one of the names reportedly on Trump’s shortlist to replace Powell.
The signal could hardly be clearer. Under Powell, the door to further easing is effectively closed. Under his successor, it may be blown off its hinges.
The Federal Open Market Committee voted 10–2 to keep the policy rate in the 3.5%–3.75% range. Notably, officials removed from their statement language that had previously highlighted rising employment risks. Since December, the data have improved: growth has accelerated, inflation has slowed, and job creation has stabilised.
“The outlook for economic activity has improved — clearly improved since the last meeting,” Powell said, adding that this should support labour demand over the medium term. Yet he was careful not to overstate the case. Stability, he insisted, is not strength. It is simply the absence of deterioration.
Markets took the message in stride. Treasury yields barely moved, with the 10-year hovering around 4.25%. The dollar edged lower after a brief bounce, and US equities closed flat. Nothing broke. Nothing surged. That, in itself, was the point.
On inflation, Powell struck a familiar note of guarded realism. The Fed’s preferred measure is still expected to end 2025 around 3% — well above target. Much of the recent price pressure, he argued, reflects goods inflation linked to tariffs rather than a broader demand shock. A one-off price level adjustment, in other words, not a runaway inflation spiral. Whether markets will share that confidence remains an open question.
What Powell largely refused to discuss was the political storm swirling around the central bank. He deflected questions about the Justice Department’s criminal investigation into the Fed, launched earlier this month, and about the administration’s increasingly overt attempts to intimidate monetary policymakers. He did, however, restate his core belief: central bank independence is not a luxury but an institutional necessity.
He also declined to say whether he would remain on the Board of Governors after stepping down as chair in May. His presence — or absence — could matter more than he lets on.
Powell confirmed that he attended last week’s Supreme Court hearing on Trump’s attempt to dismiss Fed governor Lisa Cook. “This may be the most important case in the Fed’s 113-year history,” he said. “It would have been difficult to explain why I wasn’t there.”
That sentence may outlast his term.
For now, the Fed is on hold. The data allow it. The markets tolerate it. But the pause feels less like the calm after the storm than the silence before a change of regime. Powell’s Fed is ending not with a cut, but with a line in the sand.
And yet, one last word must be added — because history is rarely fair in real time.
If Jerome Powell has recently shown character in the face of Trump’s frontal assault on the Fed, it is also true that this character was often absent throughout much of his tenure. For years, he chose conciliation over confrontation, gradualism over clarity, silence over pedagogy. He preserved the institution by bending — and in doing so, allowed politics to creep closer than it should have. I have repeatedly criticised him for that.
But history has a cruel sense of timing. When Powell leaves in May, the Federal Reserve may discover that what felt like weakness was, in retrospect, restraint — and that what comes next will not be more decisive, but more obedient. Faced with an openly politicised successor, markets may come to miss Powell’s hesitations, his caution, even his ambiguity. We may not praise him today. But we may regret him very soon.