Fed Holds Rates Steady as Powell Vows to Remain at Post Amid DOJ Investigation (Video)

WASHINGTON — In a move that underscored both economic caution and a fierce battle for institutional independence, the Federal Reserve on Wednesday opted to leave its benchmark interest rate unchanged. The decision, coming at the conclusion of a two-day Federal Open Market Committee (FOMC) meeting, keeps the federal funds rate in a holding pattern of 3.5% to 3.75%.

However, the economic news was nearly eclipsed by a defiant performance from Fed Chair Jerome Powell. During a tense post-meeting press conference, Powell addressed the ongoing Department of Justice (DOJ) investigation into his leadership, declaring his intent to remain at the central bank until the inquiry is “well and truly over.” Powell’s stance sets up a historic confrontation with the executive branch, as the DOJ continues to probe allegations related to cost overruns in the renovation of the Fed’s Washington headquarters—an investigation a federal judge recently characterized as a “pretext” for political pressure.

The Fed’s Wait-and-See Approach

The FOMC’s decision to maintain the status quo marks the second consecutive meeting where rates have remained untouched. This pause follows a period of aggressive activity at the end of 2025, during which the Fed implemented three straight quarter-point cuts.

In its official policy statement, the Committee noted that while economic activity has been expanding at a “solid pace,” inflation remains “somewhat elevated.” The Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, is now projected to hit 2.7% by the end of 2026, a slight upward revision from December’s forecast of 2.4%.

“The Committee is strongly committed to returning inflation to its 2 percent objective,” the statement read, while acknowledging that the current “uncertainty about the economic outlook remains elevated.”

The “Too Soon” Factor: War and Energy

Central to that uncertainty is the conflict in the Middle East. With the war involving Iran now entering a critical phase, global energy markets have been rattled, sending crude oil prices to multi-year highs.

Powell was remarkably candid about the difficulty of incorporating the war into the Fed’s models. He emphasized that while higher energy prices will undoubtedly push up headline inflation in the short term, the central bank believes it is “too soon” to determine the definitive scope and duration of the war’s impact on the broader U.S. economy.

“The implications of developments in the Middle East for the U.S. economy are uncertain,” Powell told reporters. “We are monitoring the situation closely, but we do not yet have enough data to assess how this will shift long-term consumer behavior or corporate investment.”

Despite the geopolitical turmoil, the Fed’s “dot plot”—a chart of anonymous projections from policymakers—still suggests a majority of officials expect at least one rate cut before the end of 2026. This indicates a belief among the board that the inflationary spike caused by the war may be temporary, though the risks remain tilted to the upside.

Powell vs. The DOJ: A Stand for Independence

The most dramatic moments of the day occurred when the topic shifted from monetary policy to the legal cloud hanging over the Chair. The DOJ, led by U.S. Attorney Jeanine Pirro, has been investigating whether Powell gave misleading testimony to Congress regarding a $2.5 billion renovation of the Fed’s 1930s-era headquarters.

Last week, U.S. District Judge James Boasberg dealt a major blow to the DOJ, quashing subpoenas for Powell’s records and stating there was “essentially zero evidence” of a crime. Boasberg’s ruling suggested the investigation was a tool used by the administration to pressure Powell into lowering interest rates or resigning.

When asked about his future, Powell was unequivocal. His term as Chair officially expires in mid-May, and President Trump has already nominated Kevin Warsh to succeed him. However, Powell’s term as a member of the Board of Governors lasts until 2028.

“I have no intention of leaving the board until the investigation is well and truly over, with transparency and finality,” Powell said.

This decision has profound implications. If Powell remains on the board as a governor after his chairmanship ends, he occupies a seat the White House would otherwise use to install a more aligned ally. Furthermore, Powell indicated that if the Senate does not confirm Warsh by the May 15 deadline—a process currently stalled by Senator Thom Tillis and others who oppose the DOJ’s tactics—he will continue to serve as chair pro tem.

Market Reaction and the Path Forward

Wall Street reacted with a mixture of anxiety and resignation. Following the announcement, the Dow Jones Industrial Average dropped 1.3%, while the S&P 500 and Nasdaq each shed roughly 1%. The 10-year Treasury yield climbed to 4.27%, reflecting market expectations that interest rates will remain higher for longer than previously hoped.

For the American consumer, the Fed’s pause means little immediate relief for mortgage rates, which have hovered around 6.1%, or for credit card interest. The “higher for longer” narrative has been reinforced not just by domestic inflation data, but by the geopolitical “wild card” of the Middle East conflict.

As the Fed moves toward its next meeting in late April, the eyes of the financial world will be split: half on the price of a barrel of oil, and the other half on the legal filings in the D.C. District Court. For Jerome Powell, the battle to protect the Federal Reserve’s “dual mandate” has now expanded into a battle to protect the institution’s very autonomy.

Sources Used

• WBZ NewsRadio 1030 (iHeart): Federal Reserve Leaves Interest Rates Unchanged
• The Times of India: FOMC policy meeting: Jerome Powell-led US Federal Reserve keeps interest rates unchanged
• Livemint: US Fed keeps rates unchanged for second straight meeting; signals one rate cut this year
• The Washington Post: Court blocks Justice Department subpoenas of Federal Reserve
• The Washington Post: Trump tried to push Powell out, but now he may be stuck with him
• The Guardian: Judge blocks justice department from subpoenaing Fed chair Jerome Powell
• Associated Press (via KVUE): Federal Reserve projects one rate cut this year, sees limited economic impact from Iran war
• Washington Examiner: Powell vows not to leave Fed until DOJ investigation concludes