Change is coming to the Federal Reserve even as interest rates are expected to stay unchanged.
The Fed is widely expected to leave its benchmark rate steady Wednesday at what could be Jerome Powell’s last policy meeting as chair. His successor may be confirmed soon, bringing a leadership change after Powell’s more than eight-year tenure.
The Senate Banking Committee is set to vote Wednesday on President Trump’s nominee to replace Powell, Kevin Warsh, a step that could lead to a full Senate confirmation in time for Warsh to assume the chairmanship when Powell’s term ends next month.
That timetable was uncertain until recently. Sen. Thom Tillis, R-N.C., had threatened to block a vote in protest of a Justice Department probe of the Fed — a move viewed as part of a White House pressure campaign to push the central bank toward lower interest rates. The potential roadblock was removed last Friday when federal prosecutors agreed to drop the investigation.
“With the assurances from the Department of Justice that the case is completely and fully settled,” Tillis told NBC’s Meet the Press, “I am prepared to move on with the confirmation of Mr. Warsh. I think he’s going to be a great Fed chair.”
Warsh has said there is room to cut rates without reigniting inflation, in part because productivity gains from artificial intelligence could help. He also told senators he would act independently and would not take direct orders from the president. “The president never asked me to commit to interest rate cuts at any particular meeting over the period of my tenure at the Fed,” Warsh said during his confirmation hearing. “He didn’t ask for it. He didn’t demand it. He didn’t require it. And nor would I have ever done so.”
Even a chair sympathetic to rate cuts cannot unilaterally change policy: rates are set by a 12-member Federal Open Market Committee, and the chair holds a single vote. Some committee members have signaled caution about cutting rates while inflation remains elevated and geopolitical tensions, including the war with Iran, have pushed energy prices higher.
Powell could opt to remain on the Fed’s governing board after his chairmanship ends; while his term as chair is ending, he could keep a seat on the board through 2028. That would be unusual, since most chairs step down entirely when their terms expire. Powell has been a strong defender of the Fed’s independence and has suggested he would decide whether to stay based on what he believes is best for the institution and the public.
Powell is expected to update reporters at the conclusion of Wednesday’s meeting, possibly for the last time as Fed chair.