Here’s everything to expect when the Fed issues its latest interest rate decision Wednesday

Federal Reserve Chair Jerome Powell is expected to preside over what could potentially be his final meeting as chair of the Federal Reserve. The decision to be made during this meeting is likely to be a cautious one, as stubborn inflation and a strong labor market leave little room for interest rate cuts at this time.

The meeting will take place amidst high energy prices and inflation levels that have exceeded the Fed’s 2% target for the past five years. Despite this, the labor market remains resilient, though not without its challenges. This combination of factors does not create an environment conducive to easing monetary policy just yet.

Economist Roger Ferguson noted that while the labor market is relatively stable, there is still work to be done in addressing the persistent 3% inflation rate. He anticipates that the Fed will maintain its current stance and wait to see how the situation unfolds.

Goldman Sachs economist David Mericle also expects the post-meeting statement to acknowledge the positive developments in the labor market and the higher inflation numbers. However, he believes that the policy guidance will remain unchanged for now.

With markets already pricing in a 100% chance of the FOMC staying on hold, the focus will shift to Powell. It is widely expected that Kevin Warsh will succeed Powell when his term ends in May, which may impact the signaling value of Powell’s post-meeting news conference.

Powell’s conference is likely to emphasize the issue of inflation, which has been running at 3% recently. The surge in crude oil prices and gasoline costs further complicates the Fed’s decision-making process. While temporary spikes in inflation are usually overlooked, the potential for prolonged impacts due to geopolitical conflicts remains a concern.

As Powell’s tenure at the Fed comes to a close, there is uncertainty about his future plans. He has the option to remain at the central bank as a governor for the final two years of his term. However, his decision is still unknown, and the completion of an investigation into Fed headquarters renovations may play a role in his choice.

Overall, the upcoming meeting is expected to maintain the status quo in terms of monetary policy, with a focus on inflation and the transition to a new Fed chair. Powell’s future remains uncertain, but his final actions as chair will have a significant impact on the direction of the Federal Reserve.