Federal Reserve Chair Jerome Powell used what may be his final rate-setting meeting to do two things that rarely travel together: preside over the biggest Fed split since 1992 and signal he is not leaving the building. The Federal Open Market Committee held the federal funds rate at 3.5 percent to 3.75 percent, as expected, but the 8-4 vote exposed a central bank arguing less about Wednesday’s decision than about whether investors should still expect the next move to be a cut.
The dissents cut in different directions. Governor Stephen Miran wanted a quarter-point cut, while Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan agreed with holding rates but objected to language that kept an easing bias in the statement. Powell, meanwhile, said he would remain on the Board of Governors until the investigation into Fed headquarters renovations is “well and truly over,” a choice that blocks President Donald Trump from immediately filling another Fed seat as Kevin Warsh moves toward confirmation as chair.
The policy bind is not just American. The Bank of Canada also held its benchmark rate steady, at 2.25 percent, while warning that the Iran war and U.S. trade policy have made the global outlook unusually volatile. Canadian officials expect inflation to peak around 3 percent in April and assume crude oil falls to $75 a barrel by mid-2027, but Brent was near US$109 per barrel Wednesday after the Strait of Hormuz blockade disrupted energy flows. Central bankers can usually look through one-off energy shocks; prolonged fuel-price pressure is harder to ignore when grocery bills, transport costs and inflation expectations start moving with it.
Canada shows the tradeoff in miniature: inflation pressure argues for caution, while housing argues for relief. The Bank of Canada now expects housing to subtract 0.1 percentage points from 2026 gross domestic product growth, reversing an earlier forecast that the sector would add to growth, as weak demand and a glut of small condos restrain construction. If oil stays elevated and forces tighter policy, the burden would land directly on borrowers through more expensive mortgages and higher funding costs, precisely as developers are already shelving projects and unsold units pile up.