April 29, 2026, 8:51 p.mApril 29, 2026, 8:51 p.m
Fed Chairman Jerome Powell remains true to his line and leaves the key interest rate unchanged.Image: keystone
The US Federal Reserve is leaving the key interest rate untouched – in view of the energy crisis and inflation concerns as a result of the Iran war. A majority of the central bank council voted to keep the key interest rate in the range of 3.5 to 3.75 percent.
At the same time, all eyes are on the possible successor to Fed Chairman Jerome Powell. Experts fear that the Fed will lose independence and therefore credibility with the confirmation of US President Donald Trump’s nominee Kevin Warsh.
In 2025, the Fed cut the key interest rate three times by one step (25 basis points) due to concerns about the labor market. She then took breaks during her first two meetings this year. Given the uncertain global situation and high inflation at the same time, interest rate cuts are becoming a distant prospect.
“The oil price shock leaves no other choice,” said Lena Dröger from the Kiel Institute for the World Economy about the committee’s decision. Economists expect that there could be a maximum easing of 25 basis points to 3.25 to 3.5 percent over the course of the year. The decisive factor will likely be how the situation in Iran develops and what role Warsh plays.
This was confirmed by the Senate Banking Committee just a few hours before the Fed’s decision. Now the entire Senate still has to give the green light.
The Fed should decide on the key interest rate independently of politics and thus find a compromise between inflation and the highest possible level of full employment. The problem at the moment: If the Fed loosens interest rates, it is likely to further fuel inflation – something it wants to avoid. The central bank recently increased its expectations for the inflation rate from 2.4 to 2.7 percent in the current year. This means it is well above its own two percent target.
It is unclear whether Trump’s nominee will be confirmed until Powell leaves the Fed chair in mid-May. This Wednesday’s meeting was scheduled to be the last interest rate decision with Powell at the head of the Central Bank Council. The next one is scheduled for June 17th.
If his successor is not clarified by mid-May, Powell says he could imagine continuing in office at least temporarily. (sda/dpa)