The Federal Reserve has kicked off its two-day interest rate policy meeting, and Chairman Jerome Powell will hold a press conference at 2:30 AM Beijing Time on Thursday (April 30). Amid the energy price fluctuations triggered by geopolitical conflicts in Iran, the dual pressures of rising inflation and slowing economic growth have significantly increased. The Fed is expected to maintain the current benchmark interest rate level to buy more time to assess various macroeconomic data. In addition to the direction of monetary policy, the market is perhaps more concerned about Powell's future, as well as the subsequent personnel changes and their impacts.

Fed Interest Rate Expectations and Minor Adjustments to Policy Statement

The Federal Reserve is holding a two-day interest rate decision meeting and will release its post-meeting statement in Washington at 2:00 PM on Wednesday (2:00 AM Thursday, Beijing Time), followed by Chairman Powell's press conference at 2:30 AM. The market widely expects the Federal Open Market Committee (FOMC) to keep the federal funds rate unchanged in the 3.5% to 3.75% range for the third consecutive time. Facing climbing energy prices and potential inflationary pressures caused by the Iran conflict, policymakers currently lean towards a wait-and-see approach. Bloomberg estimates that in terms of the policy statement, the Fed is expected to slightly tweak the description of the labor market, reflecting the current situation where the job market remains stable despite a slowdown in hiring. Meanwhile, to address inflation risks, officials may adjust the wording of their forward guidance, retaining the policy flexibility to resume rate hikes in the future rather than only considering rate cuts, which will directly affect the market's assessment of overall funding cost changes.

Chairman Powell's Future and Variables in His Board Seat Retention

Since the market has long highly anticipated that interest rates will remain unchanged this time, the focus has shifted to the future of the current Fed Chairman, Jerome Powell. His term as chairman will expire on May 15, and this meeting is expected to be his last post-meeting press conference. Investors are paying close attention to his statements regarding his career plans, especially whether he will continue to serve as a Federal Reserve Governor, a term that does not expire until January 2028. Powell previously emphasized that the judicial investigation into the headquarters renovation budget must be concluded thoroughly and transparently before he would consider stepping down. Although the U.S. Department of Justice recently announced the closure of the case, it stated that it reserves the right to reopen the investigation if there is a factual basis. Whether Powell remains as a governor will directly impact the stability of the Fed's decision-making core.

Policy Challenges Facing the New Nominee Kevin Warsh

With the Senate Banking Committee expected to advance the nomination of Kevin Warsh, the probability of him taking the helm of the Federal Reserve has significantly increased. However, Warsh will face multiple severe challenges in the future. First, the political pressure from the outside demanding substantial rate cuts will test Warsh's ability to maintain the central bank's monetary policy independence. Second, although Warsh has promised to bring institutional changes to the Fed, the pace of his reforms will be constrained by the speed of personnel changes within the committee. If Powell chooses to stay on as a governor, coupled with the divergent policy stances of existing committee members, Warsh will inevitably need to engage in complex compromises and coordination when pushing for a new framework or consolidating internal consensus.

In addition, this may also be the last policy meeting for Fed Governor Stephen Miran, as Warsh has been nominated to take his seat. The market expects that Miran may cast a dissenting vote against the majority's decision, just as he has done at every meeting since joining the Fed last September.

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