Unusually divided
Powell’s remarks came shortly after a sharply divided Fed kept interest rates unchanged for a third consecutive meeting amid heightened uncertainty from the war in the Middle East.
“Inflation is elevated, partly reflecting the recent increase in global energy prices,” the Fed said, keeping rates in a range between 3.50 percent and 3.75 percent.
Four of 12 voting officials contested the result, including Gov. Stephen Miran, who called for a quarter-point reduction.
Three regional Fed presidents – Beth Hammack, Neel Kashkari and Lorie Logan – supported the pause, but not the Fed’s statement signaling a trend toward lower interest rates. This was the largest number of dissenting votes since 1992.
“This suggests a tougher bipartisan debate on rates at Kevin Warsh’s (Fed) first meeting as chairman in June,” said ING analysts James Knightley and Padhraic Garvey.
The Fed has been on a rate-cutting path since late last year. But with the US-Israel war against Iran causing energy costs to rise and supply chains to drag, analysts are monitoring whether inflation could prompt policymakers to consider raising rates.
‘Continuous Threats’
The Senate Banking Committee voted to advance Warsh’s nomination earlier Wednesday, bringing him closer to confirmation.
But Democratic lawmaker Elizabeth Warren charged that it would further Trump’s “attempt to take control of the Fed.” Georgia Sen. Raphael Warnock added that Warsh’s nomination was tainted by “constant threats” from Trump.
While Republican Sen. Thom Tillis initially vowed to block Warsh’s nomination, he relented after the Justice Department dropped its investigation into Powell.
As for whether Warsh would stand up to Trump, Powell said, “He testified very strongly about that in his hearing, and I’ll take him at his word.”
