On April 29, the Federal Reserve’s Federal Open Market Committee (FOMC) announced its decision to leave unchanged the target range for the federal funds rate at 3.50% to 3.75%. That decision was explained by Chairman Jerome Powell in his opening statement as follows:
“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, on average, and the unemployment rate has been little changed in recent months. Inflation is elevated, in part reflecting the recent increase in global energy prices.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook. The Committee is attentive to the risks to both sides of its dual mandate.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3‑1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective…”
The full statement delivered by Powell may be viewed HERE
The most interesting aspect of what is happening with the Federal Reserve System continues to be the controversial decision by Powell to remain as a Fed member after his term as Chairman expires on May 15. He had given some indication that he would adhere to protocol and resign when his term as chairman expires if the Justice Department would drop their investigation of Powell’s conduct in connection with the renovation of the Federal Reserve building. Even though the Justice Department has dropped the investigation, Powell announced that he will not resign and instead remain as a board member.
There has been only one other case in which a departing chairman chose to remain as a member after the completion of his term as chairman, and it happened 75 years ago. When Chairman Marriner Eccles’ term expired in March 31, 1951 he remained as a member until July 14, 1951.
The nomination of Powell’s replacement, Kevin Warsh, came one step closer to confirmation on April 29, when the Senate banking committee voted along party lines to confirm him. That committee approval had been in doubt because GOP Senator Thom Tillis was holding out because of the investigation of Powell by the Justice Department. When the Justice Department announced they had dropped the Powell investigation, Tillis agreed to vote in favor of confirming Warsh.
The actions of one member of the Senate banking committee, Sen. Elizabeth Warren, can be characterized as more harassment than questioning. She went so far as to ask Warsh whether he thought that Trump had won the 2020 election. She insisted on demanding a yes or no answer even after Warsh responded that he wanted to keep politics out of the hearing. The whole Warren questioning, as reported by CBS, may be seen HERE
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