Fed On Hold As Policymakers Retain Cautious Stance
- Firm inflation and oil shock complicate easing narrative - Labour market resilience underscores hawkish risks - Powell’s final briefing and Warsh nomination in focus - Rate announcement set for 18:00 GMT/14:00 EST - Press conference scheduled for 18:30 GMT / 14:30 EST
Wednesday’s rate decision is likely to be more about a changing of the guard than a shift in current policy, as officials look set to defer to the incoming Fed chairman.
With the Federal Open Market Committee (FOMC) widely expected to leave the target range unchanged at 3.50–3.75%, developments in the Middle East and uncertainty around energy prices are set to reinforce a cautious stance among policymakers.
Barclays’ Marc Giannoni said the bank expects the statement to drop the reference to “additional” adjustments, effectively signalling that the FOMC no longer sees the next policy move as necessarily a continuation of the recent easing cycle, given firmer inflation prints and upside risks to prices. “We think most policymakers view the current policy stance as well-positioned to address risks on both sides of the Fed's dual mandate. This implies policy rates on hold for an extended period until there is more clarity about the conflict and its economic effects.”
War related price pressure
Incoming data since the last meeting has begun to reflect rising oil costs and their knock-on effects. US headline CPI rose 3.3% y/y last month, a tenth below consensus but nearly a full percentage point above the prior reading. On the month, prices increased 0.9%, in line with expectations and up from 0.3% in February, marking the largest monthly gain since June 2022.
Reassuringly for policymakers, core CPI, which excludes food and energy, rose 2.6% y/y, a tenth below forecasts but modestly firmer than the previous print. However, analysts noted that the Fed’s preferred inflation gauge, the core PCE deflator, increased 0.4% m/m in each of the first two months of the year, lifting the three-month annualised rate to 4.4% in February.
“We think these firm inflation prints, alongside elevated risks of further increases (for example, a prolonged conflict, significant restrictions through the Strait of Hormuz, or persistently high energy prices), and a labour market near full employment, will prompt the FOMC to adopt a more hawkish tone than at prior meetings,” Giannoni added.
The latest employment report also surprised to the upside, with payrolls rising by 178,000 in March, well above the 65,000 consensus and a sharp rebound from the revised 133,000 decline in February (initially reported as a 92,000 drop).
In the absence of an updated Summary of Economic Projections (SEP), attention will centre on both the statement and what is expected to be Jerome Powell’s final press conference as chairman.
JPMorgan’s Michael Feroli noted that Powell emphasised uncertainty around the near-term outlook at the March meeting. “That should still be the case, and so we don’t expect any strong signalling regarding the rate outlook.
“In January, he said hikes weren’t the base case for anyone on the Committee. In March, that remained true for the vast majority. If asked, we expect a similar characterisation.” Meanwhile, President Donald Trump’s nominee for Fed Chair, Kevin Warsh, faced a grilling before the US Senate Banking Committee last week.
There had been doubts over whether Warsh could assume the role in May after North Carolina Senator Thom Tillis initially threatened to block the appointment. However, Tillis, a Republican, reversed his position on Sunday.
“I am prepared to move forward with the confirmation of Mr Warsh. I think he’s going to be a great Fed Chair,” Tillis said on NBC’s Meet the Press.
Tillis had previously withheld support pending a Justice Department probe into Powell, whose term expires on 15 May. That investigation was dropped on Friday.
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- Firm inflation and oil shock complicate easing narrative
- Labour market resilience underscores hawkish risks
- Powell’s final briefing and Warsh nomination in focus
- Rate announcement set for 18:00 GMT/14:00 EST
- Press conference scheduled for 18:30 GMT / 14:30 EST
By Harry Daniels
LiveSquawk News
@HarryDaniels71
28 April 2026 | 11:30 GMT
Wednesday’s rate decision is likely to be more about a changing of the guard than a shift in current policy, as officials look set to defer to the incoming Fed chairman.
With the Federal Open Market Committee (FOMC) widely expected to leave the target range unchanged at 3.50–3.75%, developments in the Middle East and uncertainty around energy prices are set to reinforce a cautious stance among policymakers.
Barclays’ Marc Giannoni said the bank expects the statement to drop the reference to “additional” adjustments, effectively signalling that the FOMC no longer sees the next policy move as necessarily a continuation of the recent easing cycle, given firmer inflation prints and upside risks to prices. “We think most policymakers view the current policy stance as well-positioned to address risks on both sides of the Fed's dual mandate. This implies policy rates on hold for an extended period until there is more clarity about the conflict and its economic effects.”
Incoming data since the last meeting has begun to reflect rising oil costs and their knock-on effects. US headline CPI rose 3.3% y/y last month, a tenth below consensus but nearly a full percentage point above the prior reading. On the month, prices increased 0.9%, in line with expectations and up from 0.3% in February, marking the largest monthly gain since June 2022.
Reassuringly for policymakers, core CPI, which excludes food and energy, rose 2.6% y/y, a tenth below forecasts but modestly firmer than the previous print. However, analysts noted that the Fed’s preferred inflation gauge, the core PCE deflator, increased 0.4% m/m in each of the first two months of the year, lifting the three-month annualised rate to 4.4% in February.
“We think these firm inflation prints, alongside elevated risks of further increases (for example, a prolonged conflict, significant restrictions through the Strait of Hormuz, or persistently high energy prices), and a labour market near full employment, will prompt the FOMC to adopt a more hawkish tone than at prior meetings,” Giannoni added.
The latest employment report also surprised to the upside, with payrolls rising by 178,000 in March, well above the 65,000 consensus and a sharp rebound from the revised 133,000 decline in February (initially reported as a 92,000 drop).
In the absence of an updated Summary of Economic Projections (SEP), attention will centre on both the statement and what is expected to be Jerome Powell’s final press conference as chairman.
JPMorgan’s Michael Feroli noted that Powell emphasised uncertainty around the near-term outlook at the March meeting. “That should still be the case, and so we don’t expect any strong signalling regarding the rate outlook.
“In January, he said hikes weren’t the base case for anyone on the Committee. In March, that remained true for the vast majority. If asked, we expect a similar characterisation.” Meanwhile, President Donald Trump’s nominee for Fed Chair, Kevin Warsh, faced a grilling before the US Senate Banking Committee last week.
There had been doubts over whether Warsh could assume the role in May after North Carolina Senator Thom Tillis initially threatened to block the appointment. However, Tillis, a Republican, reversed his position on Sunday.
“I am prepared to move forward with the confirmation of Mr Warsh. I think he’s going to be a great Fed Chair,” Tillis said on NBC’s Meet the Press.
Tillis had previously withheld support pending a Justice Department probe into Powell, whose term expires on 15 May. That investigation was dropped on Friday.