Powell’s “final FOMC meeting”: Holds steady, but more hawkish!

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The outcome of the Fed’s April FOMC meeting is almost certain—interest rates will remain unchanged, but the real focus is on the signals that will be released at Powell’s last policy meeting as chairman, and whether the FOMC will formally convey a hawkish stance to the market that “rate cuts are basically off the table.”

The Federal Reserve will announce its rate decision at 2:00am Beijing time on April 30, with the benchmark rate expected to stay at 3.5%-3.75%, consensus is very strong, and only Governor Miran is expected to dissent, supporting a 25-basis-point rate cut.

The latest changes come from the inflation side—The Iran war and energy shocks continue to disturb the outlook, gasoline prices remain above $4, and the Strait of Hormuz is still highly disrupted. Meanwhile, recent employment data show resilience, reducing the urgency of dovish members to quickly support the labor market.

Fed officials generally expect that the decline in inflation will be delayed for another year. Market expectations for rate cuts have narrowed sharply—Deutsche Bank has withdrawn its previous forecast for a September rate cut, adjusting its base case to the Fed remaining “on hold indefinitely” near the neutral rate.

The core contention at this meeting centers on the risk characterizations in the statement language and the press conference—adding or removing a single word from the forward guidance could signal a dramatically different policy stance to the market. Meanwhile, as the US Department of Justice ends its investigation into Powell, Kevin Warsh’s path to Fed chair nomination is now basically unobstructed, giving this meeting historical significance.

Standing Pat Is Consensus, Debate Shifts To “Next Move”

This FOMC has no dot plot, and the rates themselves are virtually undebatable. The focus is on whether the Fed is still willing to retain the policy implication that “the next step is more likely a rate cut,” or if it will begin to acknowledge that risks have shifted in both directions.

According to Bank of America, the inflation outlook is as unclear as it was at the March meeting. While the stock market seems to be trading as if the Iran war is over, energy and shipping disturbances persist, and the transmission to core inflation remains highly uncertain.

The employment side does not provide enough reason for the Fed to hurry into a dovish shift. March nonfarm payroll, ADP, and initial jobless claims data all show labor market resilience, and even some signs of improvement. This means it is more difficult for pro-rate-cut members to continue highlighting “downside risks in jobs” as their main policy rationale.

Doves Begin Tightening, Urgency For Rate Cuts Fades

The most notable internal change at the Fed ahead of this meeting is that previously dovish members are successively tightening their stances.

Last week, Waller’s remarks not only emphasized the inflation risk from the Iran war, but also pointed to labor supply shocks. He believes this means the economy can keep the unemployment rate stable with “little or no net new employment.” BofA thinks Waller may still hope for a rate cut this year, but the scale may be less than previously expected, and the timing pushed later.

Daly's stance goes further. She said if policy remains unchanged for the year, it would provide good restraint on inflation without restricting and hurting the labor market. She also thinks the inflation impact from the Iran war may outweigh its growth impact, and Daly’s base case is now a flat rate path for the year.

Even Miran, the most dovish in the FOMC, says he now prefers three rate cuts for the year, not four, citing a worsening inflation mix since the year began. BofA believes if there were a dot plot in April, some members’ rate forecasts for 2026 would already move up, and by June, more “dots” moving higher remains a growing risk.

Statement Wording: One Word Makes A World Of Difference

The biggest focus of this FOMC statement is whether the Fed will hint that policy path risks have shifted “two ways.”

At present, the statement’s reference to “additional adjustments” implies a dovish predisposition toward rate cuts for the next step. If changed to “any adjustments” or “additional” is removed, that means the direction for the next move is no longer pre-set as rate cuts, and the policy path officially turns two-way. March meeting minutes show that the number of members supporting two-way risk language has increased from “several” in January to “some” in March, with stronger wording.

BofA considers this a near 50-50 split, but most members still prefer to maintain the current forward guidance. Deutsche Bank expects substantive guidance changes to be postponed until June, when the committee will have clearer views on the Middle East situation, labor market stability, and the inflation transmission path, but the risks are clearly hawkish.

Additionally, an adjustment is expected in the statement: due to Q4 GDP downward revisions and weak consumption in January-February, the Fed may lower the description of economic activity from “solid” to “moderate.” However, BofA notes this adjustment carries a dovish tone, which somewhat contradicts the committee’s present intent to signal hawkishness.

Press Conference: Powell’s Hawkish Stance Is A Must

If this is indeed Powell’s final press conference as chair, he will likely maintain a moderately hawkish stance.

According to BofA, Powell’s core message could be that the Fed will firmly hold steady, and current policy is “well prepared” to meet the risks facing its dual mandate. With high uncertainty, the Fed has no reason to contest the market pricing for steady rates.

The most sensitive issue at the press conference will be the bar for raising rates. If Powell reiterates that hikes are not the base case for most of the committee, the market may interpret this as dovish. If he further emphasizes completing the task of fighting inflation or says inflation has been above target for years, it will be seen as hawkish.

Notably, at the March press conference, “inflation” was mentioned 67 times, while “labor market/employment/unemployment” mentioned only 40 times. Inflation is clearly the heaviest weight in the policy balance. He is expected not to give a quantitative bar for rate hikes.

On the Iran war, Powell is likely to acknowledge both upside inflation risk and downside risks to growth and the labor market. But the market cares more about which side he leans towards. If his remarks match Daly’s—that the war impacts inflation more than growth—the market may see it as highly hawkish.

Watching Whether Rate Cuts Are Shelved Or Just Delayed

Nick Timiraos, known as the “new Fed correspondent,” wrote ahead of the meeting that the April meeting marks a turning point for deeper policy debate: how long the Fed can stick to “next move more likely a cut, not a hike.”

Timiraos notes that two years ago, Powell downplayed stagflation worries, saying “I don’t see the stag, nor the flation.” But today, wartime energy shocks and inflation not returning to the 2% goal make the historical mirror of 1970s stagflation much less distant.

He stresses the Fed is watching how the US economy digests its fourth supply shock in five years—including post-pandemic restart, Russia-Ukraine conflict, tariff turmoil, and the Iran war. Each shock alone might be dismissed as needing no policy reaction, but cumulatively, inflation expectations management becomes more difficult.

Timiraos thinks the statement itself may matter as much as the rate decision. If the Fed formally changes its statement wording and hints that rate cuts are basically off the table, the market impact may rival an actual policy action.

Last Dance And Handing Over The Position

This meeting attracts extra attention because it may be Powell’s last FOMC as chairman.

Powell’s term as Fed chair expires May 15. He previously promised to stay as “acting chair” until the successor is confirmed. As the DOJ has stopped investigating Powell, Kevin Warsh's path to Senate confirmation is now clearer.

UBS expects Kevin Warsh could be sworn in before the June 16–17 FOMC meeting. If this plays out, the April meeting will be the last full policy communication window of the Powell era, and the market will watch whether he leaves the next chair a starting point of “no rate cuts for longer.”

Market Reaction: Tail Risks In A Non-Event Disguise

Goldman Sachs trading desk sees the FOMC as a low-volatility event, but different assets still carry directional sensitivities.

On rates, GS analyst Brian Bingham expects no material hawkish shift in the statement’s inflation language, and Powell to reiterate wait-and-see. However, only about 5 basis points are priced in between now and December; the hurdle for further selling and pricing in real hike risk is high. If the baseline shifts, risks are more likely to point to higher rates, fewer cuts, and a flatter curve.

On FX, GS trader Carlie Ladda believes the Fed’s slight hawkishness may bring some dollar buying, but unlikely to spark lasting moves. The market still cares more about Iran issues, earnings, and month-end factors. The desk prefers to sell dollars if the dollar rallies.

On stocks, GS’s Vickie Chang points out the main risk from the FOMC is if Powell more cautiously emphasizes inflation risk from commodity price shocks, which may dampen risk appetite. Current risk assets have mostly shrugged off the conflict impact, and downside tail risks may be underestimated.

Risk Warning and DisclaimerThe market involves risk, investment needs caution. This article does not constitute personal investment advice, nor does it take into account individual users’ special investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their particular situation. Invest at your own risk. ```