It's set to be Jerome Powell's last meeting as Fed chair -- as a big change looms

The Senate Banking Committee votes Wednesday on Kevin Warsh's nomination to serve as the next chairman of the Federal Reserve. Andrew Harnik/Getty Images North America

Andrew Harnik/Getty Images North America

Change is coming to the Federal Reserve — even as interest rates are expected to hold steady.

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The central bank is expected to leave its benchmark rate unchanged Wednesday, at what is likely Jerome Powell's last policy meeting as Fed chairman. His replacement may soon be in place, ushering in a change at the helm of the central bank after Powell's more than eight-year tenure.

A key Senate committee is set to vote Wednesday on President Trump's nominee to replace Powell, Kevin Warsh. That would set the stage for a confirmation vote by the full Senate in time for Warsh to take over as Fed chairman when Powell's term expires next month.

That timing was uncertain just a few days ago. Sen. Thom Tillis, R-N.C., had threatened to block a vote to protest the Justice Department's investigation of the Fed, which was widely seen as part of a White House pressure campaign to force the central bank to lower interest rates.

That roadblock was cleared on Friday, when federal prosecutors agreed to drop their probe.

"With the assurances from the Department of Justice that the case is completely and fully settled," Tillis told NBC's Meet the Press, "I am prepared to move on with the confirmation of Mr. Warsh. I think he's going to be a great Fed chair."

Warsh vows to maintain Fed's independence

Warsh has argued that there's room to cut interest rates without sparking more inflation — thanks in part to the productivity gains promised by artificial intelligence. But he also told Senators he would act independently and not take marching orders from the president.

"The president never asked me to commit to interest rate cuts at any particular meeting over the period of my tenure at the Fed," Warsh said during his confirmation hearing last week. "He didn't ask for it. He didn't demand it. He didn't require it. And nor would I have ever done so."

Even if he wanted to do the president's bidding, Warsh couldn't do so on his own. Interest rates are set by a 12-person committee and the chair only gets one vote. Other members of the committee have expressed reservations about cutting rates when inflation remains elevated and the war with Iran has triggered a big spike in energy prices.

It may not be the end of Powell at the Fed

Powell could choose to retain a vote on the committee. While his term as chair is coming to a close, Powell has the option to remain on the Fed's governing board through 2028. That would be unusual, since most Fed chairs have stepped away completely when their terms were up.

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But Powell is a fierce defender of the Fed's ability to act independently of the White House. And he might see staying on the board — and denying Trump the opportunity to fill a vacancy — as another way to protect that independence.

"I will make that decision based on what I think is best for the institution and for the people we serve," Powell told reporters last month.

Powell will surely be asked for an update on his plans when he meets with reporters at the conclusion of Wednesday's rate-setting meeting, possibly for the last time.