FOMC Meeting Preview: Powell Poised to Pass the Grenade to Warsh?

Federal Reserve, FOMC Key Points

• Traders and economists expect the Fed to hold interest rates in the 3.50-3.75% range.
• The biggest question for traders is whether Powell will stay on the Federal Reserve’s board after this meeting.
• AUD/USD is showing a clear technical setup within a 100-pip range heading into the FOMC meeting.

When is the FOMC Meeting?

The April 2026 FOMC meeting will conclude on Wednesday, March 18 at 2:00 ET.

Fed Chairman Powell’s press conference will begin at 2:30 ET.

What are the FOMC Interest Rate Expectations?

Traders and economists expect the Fed to hold interest rates in the 3.50-3.75% range with high confidence

As of writing, Fed Funds futures traders are pricing in 100% odds of no change to interest rates per CME FedWatch, and even looking out to the end of the year, traders are only pricing in a ~20% probability of any interest rate cuts:

Source: CME FedWatch

Assuming the Fed leaves rates unchanged as expected, the market’s focus will immediately shift to the central bank’s Monetary Policy Statement and FOMC Chairman Jerome Powell’s final press conference for insights into the how the Fed is viewing the labor market and inflation dynamics, especially in the wake of the energy price spike from the war in Iran.

For the statement, the key question is whether the committee opts to tweak its comment about the “extent and timing of additional adjustments” to a more neutral, balanced phrasing that downplays the implication that future interest rate cuts are coming any time soon.

FOMC Meeting Forecast

With last week’s news that holdout Senator Thom Tillis is willing to advance President Trump’s handpicked Fed Chairman nominee, Kevin Warsh, this week’s FOMC meeting will officially be Jerome Powell’s last as Federal Reserve Chairman.

Chairman Powell will officially have served over eight years as the head of the world’s most important central bank, with a well-earned reputation as a consensus builder and proponent of increased communication from the central bank.

While Powell’s time as a Chairman has run out, the biggest question for traders is whether he will stay on the board to serve out his full 14-year term, which officially ends in June 2028. He had previously stated publicly that he would stay on the board until the DOJ probe of the Federal Reserve’s renovation project was “well and truly over,” and with the investigation now passed to Congress with a (lower probability) chance that the DOJ could pick it back up again, Powell may still be inclined to stick around.

For traders, the implications are relatively straightforward: If Powell says that he will step down from his governor position, it would remove an obstacle for Warsh and likely lead to lower long-term interest rates, all else equal. On the other hand, if Powell opts to stay on the board, it would undermine Warsh (at the margin) and may keep interest rates incrementally higher interest rates moving forward. Institutional changes that Kevin Warsh favors, such as eliminating the dot plot, reducing press conference, or changing the inflation measure that the central bank targets, could also be more fraught if Powell remains on the board.

Beyond that, Powell is likely to emphasize that the FOMC remains united in favor of the current interest rate range given the uncertainty around the ongoing conflict in the Middle East. As we noted last month, the war in Iran puts pressure on both sides of the Fed’s dual mandate, first by raising energy costs (and thus inflation) and secondly by weighing an already slowing labor market in the second half of the year. This scenario will make for a tough start to the job for Warsh, who must weigh the President’s ardent desire for lower interest rates against still-elevated inflation readings and a low-hire/low-fire labor market.

US Dollar Technical Analysis – AUD/USD 4-Hour Chart

Source: StoneX, TradingView

Turning our attention to the charts, AUD/USD sits in an interesting spot ahead of the Fed. The antipodean pair appears to have broken out of a “bullish flag” pattern on the 4-hour chart, potentially setting the stage for a continuation of the April rally, especially if we see more tangible progress toward peace in the Middle East or Powell announces his intention stay on the Federal Reserve board.

To the topside, the immediate resistance level to watch is in the low-0.72s, the nearly 3-year high for AUD/USD. A break above there could open the door for a continuation toward 0.7300 in time. Meanwhile, a bearish break below 0.7110 support would flip the near-term bias to the downside for a potential pullback toward the psychologically-significant 0.7000 level.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX