Jerome Powell used his final press conference as Federal Reserve chair to deliver an unexpected message: he is not leaving the Fed.
When his term expires on May 15, Powell plans to remain on the Board of Governors, citing what he called "unprecedented" legal assaults on the central bank — a move that could reshape the balance of power inside the Federal Open Market Committee.
The implication for markets is immediate. With Powell staying on and Kevin Warsh set to take over as chair, the perceived tilt toward dovish policy may be less dominant than investors had assumed.
What Did The Fed And Powell Say?
The Fed held rates steady at 3.50%-3.75% on Wednesday, but the takeaway from the meeting was far from a simple hold.
While Stephen Miran wanted a quarter-point cut, Beth Hammack, Neel Kashkari and Lorie Logan all backed the rate decision but objected to keeping an easing bias in the statement.
Four dissents. The largest split since October 1992.
Powell highlighted inflation is moving in the wrong direction, energy prices have not yet peaked and the Federal Open Market Committee is now openly debating whether its easing bias still belongs in the statement.
"The center is moving toward a more neutral place," Powell said, acknowledging that more officials are now uncomfortable with keeping language that still leans toward future cuts.
On The Middle East And Inflation
The Strait of Hormuz remains effectively closed, choking off roughly 20% of seaborne global oil trade. The International Energy Agency has called it the largest supply shock on record.
Powell said the Committee is no longer in textbook-look-through mode on energy.
“The question about looking through energy really is not in front of us right now. It hasn’t even peaked yet. I think we want to see the back side of that and progress on tariffs before we even thought about reducing rates,” Powell said.
The Chair leaned hard on the word “patience.” Powell argued the policy stance is “in a very good place,” landing somewhere between the high end of neutral and mildly restrictive.
The labor market is showing more signs of stability while inflation is “kind of misbehaving.”
That sentence effectively buried the 2026 rate-cut narrative.
The Hike Question Is No Longer Hypothetical
For the first time in this cycle, the question of whether the next Fed move could be up rather than down was on the table — and Powell did not dismiss it.
“If we need to hike, we will certainly signal that and we will certainly do it. If we need to cut then if it’s appropriate to cut we’ll signal the opposite.”
Powell stressed that none of the dissenters were calling for an immediate hike. The disagreement was over forward guidance, not the rate itself.
But he also said the central tendency on the Committee is “moving toward a more neutral place” — exactly what markets are pricing.
According to CME FedWatch probabilities, traders now assign a 0% chance of a rate cut by December 2026. By the Jan. 27, 2027 meeting, markets price a 21.5% chance that rates will be 25 basis points higher, at 3.75%-4.00%. By April 2027, that implied hike risk rises to 44.5%.
On Polymarket, the zero-cuts outcome in 2026 jumped to as high 55.6%. Despite the hawkish repricing, equities showed little stress, with the S&P 500 — as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) — holding steady during Powell's press conference.
Fed Rate Path Expectations (CME FedWatch)
| Meeting Date | 3.25–3.50% | 3.50–3.75% | 3.75–4.00% |
|---|---|---|---|
| Apr 29, 2026 | 0.00% | 100.00% | 0.00% |
| Jun 17, 2026 | 1.50% | 98.50% | 0.00% |
| Jul 29, 2026 | 1.50% | 98.50% | 0.00% |
| Sep 16, 2026 | 1.93% | 98.07% | 0.00% |
| Oct 28, 2026 | 0.00% | 97.50% | 2.50% |
| Dec 9, 2026 | 0.00% | 91.13% | 8.87% |
| Jan 27, 2027 | 0.00% | 78.50% | 21.50% |
| Mar 17, 2027 | 0.00% | 66.21% | 33.79% |
| Apr 28, 2027 | 0.00% | 55.50% | 44.50% |
Powell Is Staying As Governor And He Is Not Hiding Why
Then came the part of the press conference that will be remembered.
Powell confirmed he will continue to serve as a Governor after his Chair term ends on May 15. He offered no end date.
He said only that he will leave “when I think it’s appropriate to do so.” If he serves out his governor term, his vote on monetary policy extends to January 2028.
“My concern is really about the series of legal attacks on the Fed which threaten our ability to conduct monetary policy without considering political factors,” he said.
Powell drew a clean line between two kinds of pressure. Verbal criticism by elected officials, he said, has never been a problem.
The legal actions are different.
“These legal actions by the administration are unprecedented in the 113-year history and there are ongoing threats of additional such actions. I worry these attacks are battering the institution and putting at risk the thing that matters to the public,” he added.
According to Powell, he had long planned to retire at the end of his Chair term. He said the developments of the past three months left him no choice but to extend his stay.
“I’ve said that I will not leave the Board until this investigation is well and truly over with transparency and finality and I stand by that,” he said.
Powell welcomed the announcement Friday by U.S. Attorney Jeanine Pirro that her office had closed the criminal investigation into Powell linked to the Fed’s headquarters renovation. He noted Pirro stated she would not hesitate to restart the probe.
The Department of Justice has provided assurances over the weekend that it will not reopen the investigation absent a criminal referral from the Fed’s Inspector General.
Powell told reporters that even if DOJ appeals the recent court decision against the Pirro subpoena, prosecutors said they will not seek to restart the investigation or send new subpoenas as part of that appeal.
Pressed on whether remaining on the Board itself constitutes a political act — by denying President Donald Trump a Board majority — Powell rejected the framing and said he intends to be a constructive participant out of respect for the role of Chair.
“I plan to keep a low profile as a governor. There’s only ever one Chair of the Federal Reserve Board. When Kevin Warsh is confirmed and sworn in he will be that Chair.”
Fed Independence: At Risk
Asked directly whether Fed independence is as strong as when he became Chair, Powell did not soften the answer.
“I think it’s at risk. I think these legal assaults if you will, the institution is being battered over these things. We’re having to resort to the courts to enforce our legal — it’s not so much independence. It’s really the ability to do monetary policy without political considerations,” he said.
According to Powell, what separates successful advanced economies from unsuccessful ones is precisely the bright line that protects central banks from being pulled into politics.
He said he is confident the Fed will continue to make decisions based on rigorous analysis rather than political considerations — but added that the institution has had to fight for that and the fight is not over.
Powell answered the question of whether Kevin Warsh would stand up to political pressure with five words: he testified to that at his hearing, "and I'll take him at his word."
Image: Jack Gruber – Imagn Images
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