Fed keeps rates on hold, Powell says he will remain in place until successor confirmed

Driving the news: In a news conference following the announcement, Powell said that he intends to serve as "chairman pro tempore" of the Fed after his term as chair is up if his successor — Kevin Warsh, whom President Trump has nominated for the job — has not yet been confirmed.

• Sen. Thom Tillis (R-N.C.) is blocking Warsh's confirmation pending resolution of a criminal investigation of the Fed chair that Tillis, Powell and a federal judge believe to be a blatant pretext to try to coerce Powell to lower interest rates.
• Powell also said that "I have no intention of leaving the Board [of Governors] until the investigation is well and truly over with transparency and finality."
• Powell did not say whether he will remain on the board as a Fed governor until 2028.

Between the lines: Powell and Tillis are playing hardball with the Trump administration.

• If the administration wants to get rid of a Fed chair Trump has come to loathe, it will need to relent on the criminal investigation. U.S. Attorney Jeanine Pirro was defiant about continuing the investigation last week after a federal judge issued a scathing ruling quashing DOJ subpoenas of the Fed.
• A Fed chair has continued to serve on a pro tem basis after his term expired twice before. But both of those instances (Powell in 2022 and Alan Greenspan in 1996) were circumstances in which the sitting chair's reappointment was pending.

The big picture: The Iran war's oil shock is pushing prices up as the labor market loses steam — a threat that makes the steep interest rate cuts that Trump is demanding increasingly uncertain.

• On Wednesday, the Fed kept rates on hold for a second consecutive meeting — with the federal funds rate in a range between 3.5% and 3.75% — after three cuts late last year.
• Fed governor Stephen Miran was the lone official to dissent from the decision, preferring to cut rates by a quarter percentage point.
• New projections showed that 12 Fed officials anticipate at least one rate cut will be appropriate this year. But there are signs of division among officials beneath the surface: Seven officials see rates staying on hold throughout 2026, the same number of officials who see one cut.
• More officials now envision rates holding this year compared with December, when just four saw that being the case.

What they're saying: "The implications of developments in the Middle East for the U.S. economy are uncertain," the policy-setting Federal Open Market Committee said in new language added to its post-meeting statement.

• The Fed also removed language from January that said the unemployment rate "has shown signs of stabilization," noting instead that the jobless rate has been "little changed in recent months."
• Powell said that "in the near term, higher energy prices will push up overall inflation, but it is too soon to know the duration of the potential effects on the economy."

The intrigue: New projections show Fed officials anticipate higher inflation amid the Iran war, with the median policymaker seeing 2.7%, up from the 2.4% previously estimated in December.

• Core inflation projections, which strip out food and energy effects, were also revised up to 2.7%, from 2.5% in December.
• "The forecast is that we will be making progress on inflation," Powell said before acknowledging, "not as much as we had hoped."
• "The rate forecast is conditional on the state of the economy," he said, "so if we don't see that progress, you won't see that rate cut."

Between the lines: The new projections show that if Warsh is confirmed as Fed chair, he will inherit a policy committee with split views about the interest rate path in the months ahead.

• That might make it difficult for Warsh to push through further rate cuts, amid worries about both the employment and inflation outlooks.

By the numbers: The new quarterly projections also showed that the median official expects 2.4% GDP growth this year, slightly rosier than the 2.3% growth rate projected in December.

• The median Fed official's projection for the unemployment rate at year-end 4.4%, unchanged from the previous projections.

Editor's note: This story has been updated with details from Powell's news conference.