The Federal Reserve is expected to keep interest rates unchanged on Wednesday, in what could be Jerome Powell's final policy meeting as chair.
The Federal Open Market Committee is widely projected to maintain the benchmark rate in the 3.5–3.75% range, marking a third consecutive pause in 2026 as policymakers assess rising inflation and geopolitical risks, NBC reported.
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According to CME Group's FedWatch tool, markets are pricing in a 100% probability of no rate change. Economists say the central bank is in a wait-and-see mode amid heightened uncertainty. "There will be no update to economic projections and policy rates are widely expected to remain unchanged," said Andrew Hollenhorst.
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The policy decision comes as Powell nears the end of his term as chair on May 15, though his tenure as a Fed governor runs until January 2028. His future at the central bank remains unclear, with Wednesday's press conference likely to be dominated by questions about his next move.
Meanwhile, Kevin Warsh appears closer to succeeding Powell. The Senate Banking Committee is expected to advance his nomination after the Justice Department closed a probe linked to the Fed, easing a key political hurdle.
According to NBC, the Fed's decision is being shaped by a complex economic backdrop. Inflation has accelerated, with consumer prices rising 0.9% in March, taking the annual rate above 3.3%, while oil prices have surged nearly 70% this year amid the Iran conflict.
"Further muddying the waters for the Fed are the war, continued uncertainty about tariffs & how innovations in AI could impact the economy," said Diane Swonk.
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Labour market signals remain mixed. "Labour market signals remain mixed and volatile, pointing to broadly stable yet still fragile conditions,” economists at BBVA noted.
Looking ahead, economists are divided on the rate path. Goldman Sachs expects the Fed to reiterate its cautious stance, while Gregory Daco said Warsh could be confirmed in time for the June meeting.
Some analysts see a potential rate cut later in 2026, though others argue persistent inflation could keep policy on hold.
“There are no clear and easy policy choices,” Swonk said, adding, “Uncertain times necessitate flexibility. That is another reason to feel uneasy.”
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