Jay Powell’s final hurrah

• Enguerrand Artaz
  Strategist
  La Financière de l’Échiquier (LFDE)

He held his final post-meeting press conference, an event closely followed by market participants. And whilst, as always with this Princeton model student, his manner was measured and skilfully crafted, behind the façade one can sense signs of a transition that is less smooth than usual at the helm of the world’s most powerful central bank. Admittedly, Jerome Powell stated that, whilst he intended to remain on the Board of Governors as permitted by law, he would not act as a “shadow chairman”, leaving it to his successor, Kevin Warsh, to embody the Fed’s new direction. Yet the rifts within the institution are no less apparent.

Ironically, whilst Jerome Powell is regarded as a consensus-builder, his final meeting ended with the highest number of dissenting votes since the 1990s. As usual, Stephen Miran, appointed by Trump, opposed maintaining the status quo on interest rates, favouring a 0.25% cut. However, three other governors also dissented, albeit in the opposite direction. Whilst Beth Hammack, Neel Kashkari and Lorie Logan supported the decision to keep rates unchanged, they opposed the maintenance of an accommodative bias in the FOMC statement¹. This dual split symbolises the two opposing forces facing the Fed, which future Chair Kevin Warsh will have to try to reconcile.

On the one hand, Donald Trump’s almost obsessive desire to see the central bank cut its key interest rates, symbolised by the ultra-accommodative stance of his lieutenant Stephen Miran. On the other, a US economic reality that is increasingly incompatible with such a policy direction. Core inflation, as measured by the PCE² index used by the Fed, stands at 3.2%, well above the central bank’s targets. And whilst this figure is partly due to the delayed impact of tariff hikes, which should fade in the coming months, it does not factor in any potential second-round effects linked to the situation in the Middle East. As for the Fed’s other mandate, employment, the situation is improving significantly. The latest figures, along with revisions to 2025 data, support the view that the US labour market, having hit a low point last summer, is now at the start of a phase of renewed acceleration.

Whilst this situation obviously does not call for monetary tightening, given the already high real interest rates in the US, it does not justify the sharp rate cuts that Donald Trump continues to advocate. This raises what could be the key question for the Fed in the coming months: what of its independence? Whilst Jerome Powell has always presented himself as the guardian of its autonomy, he appeared rather concerned in the closing moments of his final press conference, which turned into a plea for the central bank’s independence, which he now considers to be ‘at risk’.

who assured the Senate during his confirmation hearing that he would not allow himself to be influenced by the occupant of the White House. A way of signalling to him that, although he says he “takes him at his word”, he will act as a safeguard should Kevin Warsh be tempted to blindly follow presidential directives in defiance of economic reality. In short, Jerome Powell has delivered his final speech as Fed Chair, but he may not have had his final say.

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¹Federal Open Market Committee
²Personal Consumption Expenditure Price Index

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