AUTHOR: James Wright | CATEGORY: Economy | TITLE: Fed Holds Steady for Third Straight Meeting as Iran War Inflation Forces Powell to Rethink Exit
The Federal Reserve left its benchmark interest rate unchanged for the third consecutive meeting on Wednesday, with Chair Jerome Powell signaling he will remain as a board governor after his chairmanship term ends in May — a move without modern precedent that underscores the institution’s deepening political Stra In an era of record energy prices and accelerating inflation driven by the escalating Iran conflict, the Fed’s resistance to rate cuts has drawn fierce criticism from the White House while leaving businesses and households facing persistently expensive borrowing costs.
The Third Hold: What the Fed Decided and Why It Matters
The Federal Open Market Committee voted unanimously to maintain the federal funds rate at its current target range, marking the third consecutive meeting without a rate increase or reduction. The decision arrived against a backdrop of inflation now running well above the Fed’s 2% target, with the Iran conflict creating fresh supply shocks across global energy and commodity markets.
Brent crude surged to $109.26 per barrel on Thursday, up 3.35% in a single session, while West Texas Intermediate climbed to $105.42. The moves came as traders priced in the risk of a wider Middle East disruption to global oil supply chains. Natural gas rose 2.28%, and European TTF gas — a key benchmark for the continent’s energy costs — gained 5.27%.
“The institution is battered,” Powell told reporters at Wednesday’s post-meeting conference, acknowledging that the Fed had been forced to seek court intervention to preserve its independence amid repeated attempts by the Trump administration to remove board governors. “It’s not over.”
Powell’s Unprecedented Decision to Stay On
In a historic break with modern convention, Powell announced he will remain as a Federal Reserve governor after his term as chair concludes in May. Since 1948, no Fed chair has carried on as a board member after their chairmanship ended. Capital Economics called the decision “a bold departure from the norm.”
The move followed the Department of Justice’s closure of an investigation into Powell’s oversight of renovations at the Fed’s Washington headquarters — an inquiry he had called politically motivated. Powell had previously insisted he would depart the institution entirely once that probe reached a conclusion.
“I’m waiting for the investigation to be well and truly over with transparency and finality,” Powell said Wednesday when pressed on his timeline. The DOJ inquiry, led by U.S. Attorney Jeanine Pirro, ended April 24, clearing the way for Powell to stay.
Trump’s Response and the Independence Question
President Trump, who has repeatedly criticized Powell for not delivering steeper rate cuts, reacted with mockery. “Jerome ‘Too Late’ Powell wants to stay at the Fed because he can’t get a job anywhere else — Nobody wants him,” the president wrote on Truth Social.
The exchange highlights growing tension between the White House and the central bank. Trump has also moved to fire Federal Reserve Governor Lisa Cook, prompting the Fed to go to court to block her removal. The Supreme Court is expected to rule later this year on whether the president has authority to remove board governors at will.
Bankrate financial analyst Stephen Kates noted Powell’s decision to remain as governor signals a strong commitment to institutional independence. “You want people to make monetary policy and set interest rates to benefit the general public, and focus only on that and ignore political considerations,” Kates said. “This isn’t bipartisan — it’s nonpartisan.”
What This Means for Markets and Borrowing Costs
For households and businesses, the Fed’s third consecutive hold means borrowing costs remain elevated. Mortgage rates, credit card Annual Percentage Rates, and business lending costs are all effectively pinned at their current levels, leaving monetary conditions restrictive at a time when energy-driven inflation is putting pressure on corporate margins and consumer budgets.
The persistence of high inflation — compounded by oil market uncertainty stemming from the Iran conflict — limits the Fed’s room to pivot toward easing. Capital Markets have already begun pricing in a higher-for-longer rate environment, with traders pushing back expectations for the next Federal Reserve rate cut into late 2026 or early 2027.
Gold retreated 2.22% on Thursday to $4,547.89 per troy ounce as some traders trimmed safe-haven positions, though the yellow metal remains up 5.28% year-to-date. Copper fell 4.81%, reflecting concerns about global industrial demand at a time of contracting growth. Silver dropped 9.18% and orange juice futures plunged 9.29%, the latter reflecting a mix of weather pressures and speculative position unwinding.
James Wright is an economics correspondent for Media Hook. This article was published May 17, 2026.
