Fed Holds at 3.5%–3.75% in Powell's Final Meeting Amid Rare Dissent

The Federal Reserve's April 2026 meeting did exactly what markets expected — and revealed exactly the kind of internal disagreement that makes the Fed's next moves harder to predict. On 29 April, the Federal Open Market Committee voted to hold the benchmark federal funds rate in a range of 3.50% to 3.75%. The decision was not unanimous: a rare bloc of dissents indicated that some policymakers wanted to cut, others to hold longer, and a smaller number to consider tightening.

Why the Fed is stuck

The post-meeting statement noted that "inflation is elevated, in part reflecting the recent increase in global energy prices." The CPI hit 3.3% on an annual basis in March 2026 — the highest reading since May 2024 and well above the Fed's 2% target. Core PCE, the measure the Fed prefers, sat at 3.0% in February, down from a peak above 5.5% in 2022 but still uncomfortable.

At the same time, the labour market has softened. Hiring has slowed, the unemployment rate has drifted higher, and certain sectors — financial services, parts of tech, manufacturing exposed to tariff disruption — are visibly retrenching. The Fed is, in effect, balancing inflation risk against employment risk, with neither reading clear enough to dictate the next move.

Powell's last meeting

The April meeting is widely understood to have been Jerome Powell's final FOMC meeting as Fed Chair. His term ends in May 2026; the succession process has moved fast under Trump, with the President signalling a preference for a more dovish chair willing to cut rates more aggressively. The hold-with-dissents decision in April reads, partly, as Powell's institutional message: leaving an inflation-cautious posture as the baseline going into the transition.

What markets expect

Fed funds futures price in essentially no further moves through 2026 and into 2027. The Fed's own median Summary of Economic Projections still indicates one quarter-point cut in 2026, even after officials raised their inflation forecasts. The gap between market pricing and the median dot is a familiar symptom of late-cycle uncertainty — both could be right depending on whether tariffs feed through more or less than expected.

The tariff factor

The most significant exogenous driver of Fed policy in 2026 is, paradoxically, not Fed-controlled at all. The Trump tariff stack — and its post-Supreme-Court reconstruction under Section 232/301/122 — feeds inflation through import prices and supply-chain disruption while simultaneously suppressing growth in trade-exposed sectors. The combination is the textbook stagflationary pressure that historically gives the Fed its hardest decisions.

What to watch

Three things. First, who replaces Powell and how the new chair signals on the cut/hold/hike trade-off. Second, the May and June CPI prints — if 3.3% holds or rises, cuts get harder. If it falls toward 2.7–2.8%, a single cut becomes plausible by year-end. Third, labour-market data: a clear weakening would shift the balance toward easing regardless of inflation.

The Fed is in wait-and-see mode. So is everyone else.