Jerome Powell has two more opportunities to adjust interest rates before his term as Federal Reserve chair ends — and he may not need them.

After the Fed kept borrowing costs on hold Wednesday, Powell talked up a “clear improvement” in the US outlook and said the job market shows signs of steadying. It signals a cautious optimism: Fed officials delivered three cuts last fall, and see nothing in the latest data to suggest more are needed to prop up the economy. Futures markets expect no shift in rates before June.

By then, Powell’s term as chair will have ended and a new one should be in place — likely opening another phase of President Donald Trump’s campaign for lower rates, which has upended the Fed over the past year. In a potential sign of what’s coming, the only two officials who voted for another cut this week were Governor Stephen Miran — on leave at the Fed from his post as a top Trump aide — and Governor Christopher Waller, one of four names on Trump’s shortlist of potential Powell successors.

“The window for a cut under a Powell-led Fed is essentially closed,” said Stephanie Roth, chief economist at Wolfe Research. “He is more optimistic about the labor market and economy overall than he was.”

The Federal Open Market Committee voted 10-2 Wednesday to hold the benchmark federal funds rate in a range of 3.5%-3.75%. Waller and Miran dissented in favor of a quarter-point reduction. Officials dropped language pointing to increased downside risks to employment that had appeared in the three previous statements.

Numbers published since the Fed’s December meeting point to accelerating growth, cooling inflation and steadying employment.

“The outlook for economic activity has improved, clearly improved since the last meeting, and that should matter for labor demand and for employment over time,” Powell told reporters Wednesday.

That upgraded assessment of the labor market is likely to hold expectations for a near-term rate cut at bay, despite escalating pressure from the Trump administration. Still, Powell was at pains not to overstate the improvement in the labor market. While it’s shown signs of stabilizing, “I wouldn’t go too far with that,” he said.

Fed watchers said the mixed messaging suggests policymakers want to keep their options open.

“You could get whiplash from the various descriptions,” said Tim Mahedy, a former senior adviser at the Federal Reserve Bank of San Francisco.

Financial markets showed no strong reaction. Bond yields were largely unchanged with 10-year yields steady at about 4.25%. The dollar edged lower from the day’s high, which came after Treasury Secretary Scott Bessent touted a strong-dollar policy. The S&P 500 was also little changed on the day.

The Fed chief demurred when asked what it may take for another rate move. “We’re not trying to articulate a test when to next cut, or whether to cut at the next meeting,” he said.

On inflation, Powell said the overall story was “modestly positive,” despite his estimate that the Fed’s favored gauge ended 2025 at 3%, a full percentage point above target.

“Most of the overshoot was in goods prices, which we think is related to tariffs,” he said. “We think those will not result in inflation, as opposed to a one-time price increase.”

Political Backdrop

Powell avoided answering most questions about the extraordinary political backdrop overshadowing the central bank — including a Department of Justice’s criminal investigation into the central bank.

The DOJ earlier this month issued subpoenas to the Fed, prompting an unusually forceful response from Powell. He accused the administration of trying to grab control over interest rates through intimidation.

Without commenting directly on pressure from the Trump administration, Powell on Wednesday repeated his defense of central bank independence — calling it “an institutional arrangement that has served the people well.”

Asked whether he’d made a decision on whether to remain on the Fed’s Board of Governors after his term as chair expires in May, Powell said no, and declined to say when he’d decide.

Powell did comment on his decision to attend a Supreme Court hearing last week over Trump’s attempt to fire Fed Governor Lisa Cook. “That case is perhaps the most important legal case in the Fed’s 113-year history,” he said. “I thought it might be hard to explain why I didn’t attend.”

(With assistance from María Paula Mijares Torres, Enda Curran, Catarina Saraiva, Jonnelle Marte, Maria Eloisa Capurro, Vince Golle and Ye Xie.)

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