- Kevin Warsh takes over as Fed Chair on May 15, inheriting a committee divided on the direction of the next rate move. The transition comes as Middle East energy shocks push inflation higher while growth signals stay mixed.
- The April 29 vote was 8-4, with dissents running in both directions. Governor Miran wanted a cut; three others — Hammack, Kashkari, and Logan — opposed language in the statement suggesting rates would eventually fall.
- Markets are pricing the next cut for mid-to-late 2027, according to CME FedWatch data — roughly 18 months away — with Bank of America forecasting rates on hold through the end of 2026.
The Federal Open Market Committee held the federal funds rate at 3.50–3.75 percent on April 29, the third consecutive meeting without a change after the Fed paused its cutting cycle that had begun in late 2024. The decision was not clean. Governor Stephen Miran voted to cut by 25 basis points, while Beth Hammack, Neel Kashkari, and Lorie Logan dissented in the opposite direction — opposing statement language that left the door open to future cuts. The official statement cited “elevated” inflation “in part reflecting the recent increase in global energy prices” and flagged “developments in the Middle East” as a source of “a high level of uncertainty about the economic outlook.”
The committee is navigating a dual-mandate contradiction. Economic activity is “expanding at a solid pace” but job gains have slowed. Inflation has risen again — not because of domestic demand but because Iran-war energy shocks are working through fuel and transport costs. Raising rates to address cost-push inflation risks tipping a slowing labour market into worse territory; holding accommodates inflation; cutting would send the wrong signal to bond markets already priced for extended restrictive policy.
The Warsh succession
Jerome Powell’s term as Fed Chair ends on May 15, when Kevin Warsh takes over. Warsh, a former Fed governor who served under Bernanke, was nominated by Trump and confirmed by the Senate in March. His monetary policy instincts lean hawkish — he was among the Fed governors who advocated faster tightening in the 2009–10 recovery — but the situation he inherits is more complex than any straightforward hawkish framing suggests.
Warsh will need to manage a fractious committee, establish credibility with bond markets, and make a judgment call on whether the Middle East energy shock is a temporary disruption or a persistent inflation driver. The market’s bet — 18 months until the next cut — partly reflects uncertainty about how his leadership style will differ from Powell’s careful data-dependence, and partly reflects genuine scepticism that the inflation picture will improve quickly enough to justify easing.
What the dissents reveal
Four dissents on a single rate decision is unusually high for a central bank that values the appearance of consensus. The split — one governor wanting cuts, three opposing even the language suggesting eventual cuts — maps onto a deeper disagreement about whether the Fed’s primary risk is overtightening into recession or under-tightening into entrenched inflation. That debate is not new, but the Iran war has given the inflation hawks a new argument and given the growth doves a new fear, leaving the committee balanced uncomfortably between the two.