The Federal Reserve held its benchmark interest rate steady on Wednesday in the most divided policy vote since October 1992, splitting 8-4 as Chair Jerome Powell announced he would remain on the Board of Governors after his term as chair expires May 15 and the Senate Banking Committee advanced Kevin Warsh as his successor.

The decision left the federal funds rate in a range of 3.5 to 3.75 percent, in line with what futures markets had treated as a certainty. The drama was the breadth of the dissent and the question of whether the outgoing chair will still be at the table when his successor arrives.

What the vote said

Governor Stephen Miran, who joined the Fed in September 2025, dissented in favor of a quarter-point cut. The other three no votes came from regional presidents Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas, who agreed with the hold but objected to the easing bias embedded in the post-meeting statement. At issue was the line committing the Federal Open Market Committee to weigh "the extent and timing of additional adjustments" to the funds rate, language that implies the next move is down.

The statement also acknowledged that "Inflation is elevated, in part reflecting the recent increase in global energy prices," a nod to the war with Iran and the disruption in the Strait of Hormuz that has pushed crude above $100 a barrel. Headline inflation has held above the Fed's 2 percent target since late 2023.

Four dissents are the most the FOMC has logged in 33 years. Brent Schutte, chief investment officer at Northwestern Mutual, wrote that "In a term generally marked by consensus building and few dissents, Chair Powell concludes his term with 4 dissents," arguing that the split foreshadows a noisier policy debate under new leadership.

Powell stays

In the news conference that followed, Powell resolved a question that had hung over the meeting. He will not leave the Board of Governors when his chairmanship ends; his term as governor runs through January 2028.

"I plan to keep a low profile as a governor," Powell told reporters. "There's only ever one chair ... When Kevin Warsh is confirmed and sworn in, he will be that chair."

Powell tied the decision to the Justice Department investigation of renovations at the Fed's headquarters, which U.S. Attorney Jeanine Pirro referred to the central bank's inspector general last week after a court rejected her subpoena of the chair. Powell said he would remain on the board until the matter is, in his words, "well and truly over with transparency and finality." He added that "The things that have happened really in the last three months have, I think, left me no choice but to stay until I see them through at least that long."

The last sitting Fed chair to remain on the board after his term at the helm expired was Marriner Eccles in 1948, during a similar fight with President Harry S. Truman over rates and government borrowing costs. That clash produced the 1951 Treasury-Fed Accord codifying the central bank's independence.

On Trump

Powell, appointed by Donald Trump during his first term, used the lectern to push back on the president directly. He called Trump's criticism "unprecedented in our 113-year history" and warned that "these attacks are battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policies without taking into consideration political factors."

By holding his board seat, Powell denies Trump a near-term majority on the seven-member board. With Warsh seated in place of Miran, whose term has expired, Trump appointees would number three: Warsh, Christopher Waller and Michelle Bowman.

The new chair

The Banking Committee earlier Wednesday voted 13-11 along party lines to advance Warsh's nomination, after Sen. Thom Tillis dropped his hold over the weekend. A full Senate vote is expected before May 15. Warsh has argued that productivity gains tied to artificial intelligence leave room to lower rates without reigniting inflation, and told the committee last week that "The president never asked me to commit to interest rate cuts at any particular meeting over the period of my tenure at the Fed."

Josh Jamner, senior investment strategy analyst at ClearBridge Investments, said "the addition of Kevin Warsh to the FOMC will not swing the balance between doves and hawks, as Warsh will take Stephen Miran's seat given Powell's seat will not be open for the time being."

Dissent from the left

Not everyone on Capitol Hill regards the path as cleared. Sen. Elizabeth Warren, the top Democrat on the Banking Committee, said before Wednesday's vote that "No one is fooled," and that "Trump is still going after control of the Fed, and he is keeping the threat of bogus criminal charges alive until he gets what he wants." Pirro has said she would reopen the investigation if new evidence of criminal wrongdoing emerges, leaving a lever the White House has not formally surrendered.

Futures markets are pricing in no further moves in 2026 and only one cut in 2027, a path that would land the funds rate near the 3.1 percent level FOMC participants identified as neutral at their March meeting. The next test arrives May 15, when Powell's term as chair ends and, on current timing, Warsh's begins.