The Federal Reserve interest rate meeting is approaching! Amid political turmoil, Powell's final battle is expected to focus on "stability."

The Federal Reserve will hold a monetary policy meeting this week, which will also be the last policy meeting attended by Powell as the Federal Reserve Chairman. The market widely expects the Federal Reserve to keep interest rates unchanged, and the policy statement is likely to be subdued. In contrast, the political turmoil surrounding the leadership transition at the Federal Reserve is attracting more attention from the market. Last week, the U.S. Department of Justice withdrew a controversial criminal investigation against the Federal Reserve, clearing the way for Kevin Warsh, nominated by Trump to succeed Powell as the Federal Reserve chairman, to be confirmed. Senator Tom Tillis, who had been blocking the nomination, announced on Sunday that after the Department of Justice assured him the investigation had "completely ended," he would support Warsh's appointment. The Senate Banking Committee, where Tillis sits, is scheduled to vote on Warsh's nomination on April 29. A Federal Reserve spokesperson declined to comment. Federal Reserve interest rate meeting this week expected to be uneventful This meeting is expected to be Powell's last policy meeting at the helm of the Federal Reserve, with market expectations of no significant surprises. Concerns about a potential war with Iran or inflationary pressures, combined with resilient labor market performance, are likely to prompt Federal Reserve policymakers to keep the benchmark interest rate unchanged in the range of 3.5%-3.75% for the third consecutive meeting. Federal Reserve officials are also unlikely to provide clear signals on future policy directions. Former senior Federal Reserve advisor Robert Taittullo said they, like all market participants, find it difficult to predict how energy shocks will ultimately evolve. Taittullo said, "They will try to maintain an ambiguous stance as much as possible. Everyone will say, 'We cannot predict the situation, but we are prepared, the tone of the meeting is likely to be similar." In their last policy meeting on March 17-18, Federal Reserve officials grappled with mounting inflation concerns. Some officials even wanted to signal a possible rate hike in the future, but the proposal did not garner enough support and was not included in the post-meeting statement. Subsequent data showed that the U.S. consumer price index (CPI) in March saw its largest monthly increase in nearly four years, driven by soaring gasoline and diesel prices. Meanwhile, labor market and consumer spending data remained strong. Retail sales in March hit a one-year high, employment rebounded, and the unemployment rate unexpectedly declined. Diana Swanke, Chief Economist at PwC, believes that these data points signify that the Federal Reserve is likely to retain policy flexibility. Swanke said, "The Federal Reserve needs to signal 'all policy options reserved.' Demand resilience persists, uncertainty continues to rise, supply shocks are frequent and severe, and the next move in interest rates could be up or down." In recent weeks, U.S. bond yields have remained in a narrow range, with market expectations for a Fed rate cut fluctuating between 30% and 60% for the year, a situation that may persist until oil price trends become clearer. "High inflation numbers will persist, and the longer inflation remains high, the more obvious the drag on economic growth," said Gregory Farinella, Head of U.S. Interest Rate Trading and Strategy at AmeriVet Securities. Political turmoil takes center stage as Powell likely faces subdued farewell However, at present, the monetary policy decisions have been overshadowed by the political drama surrounding the leadership change at the Federal Reserve. Last Friday, the U.S. Department of Justice announced the cancellation of an investigation into the renovation project at the Federal Reserve headquarters. The investigation had once disrupted the Federal Reserve leadership transition plan. Powell's term as Federal Reserve Chairman ends on May 15, and Warsh, who received widespread support from Republican senators at a hearing before the Senate Banking Committee last week, is poised to succeed him. But uncertainties remain as to whether Warsh will be confirmed before Powell's term ends, until Tillis withdrew his opposition over the Department of Justice investigation. Powell has pledged to continue serving as a Federal Reserve Board member until the investigation into the renovation project is resolved in a "transparent, thorough" manner. His term as a board member will continue until 2028. Since receiving a subpoena from the U.S. Department of Justice in January, Powell has insisted that the investigation was politically motivated by Trump's dissatisfaction with Federal Reserve interest rate decisions. Powell's commitment to remaining a board member is unlikely to change. U.S. Attorney for the District of Columbia Jennie Pitro, who announced the cancellation of the investigation, said she would await the results of the Federal Reserve Inspector General's review of the renovation project. She also explicitly stated that she would "restart the criminal investigation if the facts require it." David Sev, Chief Economist for Developed Markets at Nomura Securities, said that at least in terms of policy, Powell is likely to avoid sending any potentially confusing new information during the press conference scheduled for Wednesday. He said, "There won't be any clear policy signals. This is a typical 'lame duck' meeting."