The US Federal Reserve has kept its benchmark interest rate unchanged for a third consecutive meeting, as policymakers grapple with heightened uncertainty linked to the war in the Middle East.
The decision, which leaves rates at a range of 3.50% to 3.75%, is expected to be the last overseen by Chair Jerome Powell — though he has signalled he plans to remain on the central bank’s board beyond the end of his term.
“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.”
The central bank also indicated it could still cut rates in the coming months.
The current decision exposed sharp divisions within the Fed, with the most dissents since October 1992. Three officials opposed language signalling possible future rate cuts, while a fourth, Stephen Miran, called for an immediate reduction.
The split highlights growing disagreement within the Fed’s 12-member rate-setting committee ahead of Mr Powell’s term ending on 15 May.
Mr Powell said he intends to remain on the Federal Reserve’s governing board for “an undetermined period of time”, citing concerns about what he described as “unprecedented” legal attacks by the Trump administration on the central bank.
“I worry these attacks are battering this institution and putting at risk the things that really matter to the public,” he said at a press conference.
His decision to stay would deny President Donald Trump an immediate opportunity to appoint a new governor. Mr Trump’s nominee to succeed him as chair, Kevin Warsh, has already been approved by the Senate Banking Committee.
Mr Powell said he would wait for the conclusion of an investigation into the Fed’s building renovations before stepping down fully.
“I’m waiting for the investigation to be well and truly over, with finality and transparency,” he said. “I will leave when I think it appropriate to do so.” Powell would continue as a Fed governor, possibly until January 2028.
Mr Warsh has promised sweeping changes at the central bank, including to its economic models and communications strategy, and has backed calls for rate cuts. But with inflation running above the Fed’s 2% target, analysts say such moves may prove difficult to implement.
The economic backdrop remains uncertain. Inflation has risen to 3.3%, driven in part by higher energy prices, while hiring has slowed sharply. Although unemployment remains relatively low at 4.3%, the Fed faces a delicate balance between supporting growth and containing price pressures.