Federal Reserve officials left interest rates unchanged, but revealed a deepening division over the outlook for policy amid increased uncertainty caused by the conflict in the Middle East.

Four officials voted against the decision, including three who objected to language in their post-meeting statement that suggested the central bank would eventually resume cutting rates.

Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan “supported maintaining the target range for the federal funds rate but did not support inclusion of an easing bias in the statement at this time,” the committee said.

Governor Stephen Miran dissented in favor of a quarter-point reduction in rates.

The 8-4 vote marked the first time since October 1992 that four officials dissented against a Federal Open Market Committee decision. The committee left their benchmark federal funds rate in a range of 3.5% to 3.75%.

The S&P 500 and Treasuries remained lower after the decision.

Heading into the meeting, investors and economists widely expected the Fed to leave rates unchanged through the remainder of the year.

Officials made a slight change to their statement, saying “developments in the Middle East are contributing to a high level of uncertainty about the economic outlook.” They previously said the implications of the conflict on the economy were uncertain.

Officials repeated the phrase referring to “the extent and timing of additional adjustments” to rates. Policymakers lowered rates three times in the closing months of 2025.

Powell’s future

The meeting was likely Jerome Powell’s last at the helm of the central bank after the Justice Department dropped a controversial criminal investigation into the Fed, clearing the way for the Senate confirmation of Kevin Warsh as the next chair.

Powell is scheduled to hold a press conference at 2:30 p.m. in Washington.

In addition to questions on policy, he’s sure to be asked whether the DOJ announcement will be enough to convince him to step down as a member of the central bank’s Board of Governors. Powell’s term as chair expires May 15, but he can remain in his board seat until January 2028.

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Warsh will take the helm as the U.S.-Israeli war with Iran continues to fan uncertainty among business leaders and economists. The resultant surge in energy prices has threatened to fuel already-stubborn inflation, and the extra burden on consumers could lead to slower growth and job cuts.

That sets up a central banker’s nightmare: higher inflation and climbing unemployment that tug monetary policy in two directions at once.

For now, the unemployment rate appears to have stabilized. But net hiring has fallen to near zero over the past year, making the labor market vulnerable to shocks, according to multiple policymakers.

At the same time, inflation has been above the Fed’s 2% target for five years. As officials met on Wednesday, Brent crude prices hit their highest since June 2022. While no Fed official has said they expect the next policy move to be a hike, several are keen to signal that it could be.

A report earlier this month showed consumer price inflation surged in March by the most in nearly four years on the back of a record increase in gasoline prices. That spike is largely contained to energy prices for now, but companies and economists have warned the longer the war goes on, the more likely inflation is to bleed into non-energy goods and services.

Stay or go

Meanwhile, Warsh now has a clear path to confirmation after Republican Senator Thom Tillis lifted his opposition to Warsh’s confirmation over the DOJ probe.

The Senate Banking Committee voted Wednesday to advance Warsh’s nomination to the full Senate. Once confirmed, Warsh would take Miran’s seat.

The news is less likely, however, to convince Powell to depart the central bank altogether. Powell has pledged to remain in that role until the DOJ probe is resolved “with transparency and finality.”

Even as she declared the investigation closed, the U.S. District Attorney for the District of Columbia, Jeanine Pirro, made clear she might restart it “should the facts warrant doing so.”

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