According to the scheduled agenda, late on April 21, global financial markets closely watched the testimony of Kevin Wash, the nominee for Federal Reserve Chair, at the U.S. Senate Banking Committee hearing. From April 28 to 29, the Federal Open Market Committee (FOMC) will hold its monetary policy meeting to further clarify the balance sheet runoff path and future interest rate policy guidance. The term of current Fed Chair Jerome Powell officially ends on May 15, and the transition of policy leadership has entered a countdown. Combined with the 3.3% year-on-year rise in U.S. March CPI hitting a two-year high, and sustained inflationary pressure driven by surging oil prices amid geopolitical conflicts, the Federal Reserve’s monetary policy trajectory and leadership transition have become the core focus of global markets.

 

As Trump’s nominee to lead the Federal Reserve next, Wash’s policy stance has drawn widespread global attention. He stated that if confirmed and entrusted with leading the Fed, he would push for comprehensive reforms in policy formulation. He noted that the Fed requires a new inflation framework and that its policy implementation mechanism needs fundamental overhauls, yet he provided no further specific details.

 

Wash also emphasized that he would make independent monetary policy decisions free from any advice or pressure from U.S. President Donald Trump. Notably, in a recent interview, President Trump remarked that he would be disappointed if the new Fed chair failed to cut interest rates.

 

During Wash’s testimony, all three major U.S. stock indices plunged and turned negative. Precious metal markets also declined broadly. As of 23:00 Beijing Time, spot gold fell 1.73%, while spot silver dropped by more than 3%.

 

Matthew Luzzetti, Chief U.S. Economist at Deutsche Bank, commented that if Wash fails to firmly safeguard Federal Reserve independence, it could stoke market concerns over long-term inflation and push up long-term interest rates—a variable the Fed cannot directly control. Derek Tang of monetary policy research firm LH Meyer warned that Wash’s “honeymoon period” is likely to be extremely short. Should he fail to meet market rate-cut expectations, he risks repeating the missteps of Jerome Powell. Uncertainties still linger over the nomination process: Republican Senator Thom Tillis has explicitly stated he will block the nomination from reaching a full Senate vote until the Department of Justice concludes its investigation into Powell. It remains unclear whether Wash will be confirmed before Powell’s term expires.

 

Meanwhile, the Fed’s late-April policy meeting remains highly market-sensitive. One core agenda of the meeting is to further outline quantitative tightening (QT) plans. The Fed’s balance sheet still exceeds $6.7 trillion, and investors are closely monitoring the pace of balance sheet reduction and adjustments to its runoff caps. At its March meeting, the Fed had already announced a slowdown in Treasury roll-offs starting April, cutting the monthly cap from $25 billion to $5 billion, while keeping the monthly cap on agency debt and MBS runoff unchanged at $35 billion. Powell stated at the time that the slower QT pace was a purely technical adjustment carrying no policy signals, and that the timing was appropriate for recalibrating runoff speed.

 

Markets expect the April meeting to maintain this stance, while potentially releasing more details on the QT endpoint and duration. On interest rate guidance, the federal funds rate target range remains at 4.25%–4.5%. Futures markets indicate that 2026 rate-cut expectations have cooled sharply, with the probability of any rate cuts within the year falling below 50%. Citi analysts noted that any policy remarks from Wash during the hearing could pre-emptively influence the April meeting’s bias, as markets await clear policy anchors to reprice assets.

 

Persistent inflationary pressure continues to narrow the Federal Reserve’s policy room for maneuver. Data released by the U.S. Bureau of Labor Statistics on April 10 showed March CPI rose 3.3% year-on-year, a sharp rebound from 2.4% in February and the highest level since June 2024. On a month-on-month basis, inflation climbed 0.9%, the largest monthly increase since July 2022. Energy prices surged 10.9% month-on-month, with gasoline prices spiking 21.2% in a single month—the steepest monthly jump since 1967—accounting for nearly three-quarters of the total CPI increase. Core CPI, excluding food and energy, rose 2.6% year-on-year and 0.2% month-on-month; while milder, this reading still remains above the Fed’s 2% inflation target.

 

Wang Jinbin, professor at the School of Economics, Renmin University of China, pointed out that the energy price surge directly lifted March CPI, closely tied to Middle East geopolitical tensions. Secondary impacts from the oil price shock have not yet fully filtered into core inflation, leaving upside risks to upcoming inflation data. Mary Daly, President of the Federal Reserve Bank of San Francisco, stated that rate cuts remain possible if Middle East tensions de-escalate rapidly and oil prices retreat. Conversely, should inflation persist above expectations, the Fed will remain on hold until confident inflation is sustainably contained. A growing number of economists argue that amid rebounding inflation, the Fed is highly unlikely to cut rates in 2026, and may even resume rate hikes.

 

According to CME FedWatch Tool data: The probability of a 25-basis-point rate hike in April stands at 0.5%, with a 99.5% chance of rates remaining unchanged. The probability of a cumulative 25-basis-point cut by June is 1.4%, a 98% chance of steady rates, and a 0.5% probability of a 25-basis-point hike.

 

John Williams, President of the New York Fed, stated that current monetary policy is “well-positioned” to withstand prolonged supply-side shocks stemming from Middle East conflicts. In contrast, Fed Governor Adriana Kugler (Milan) maintained her view that the Fed should deliver 3 to 4 rate cuts in 2026, seeing no justification for delaying cuts.

 

Uncertainty surrounding the leadership transition has further heightened market anxiety. While Powell’s term as Chair expires on May 15, his term as a Fed Governor extends through 2028. Powell clarified that he has no intention of departing the Fed until the DOJ investigation into the Fed headquarters renovation project concludes. Should Wash’s nomination not be confirmed in time, Powell will serve as interim Chair per regulation until a successor is formally installed. President Trump has repeatedly issued public warnings that he will directly dismiss Powell should he remain in office after his chairmanship term ends.

 

Analysts warn that delays or disruptions in the leadership handover could erode market confidence in Fed independence and amplify volatility across global financial markets. At present, Wash’s confirmation hearing and the April FOMC meeting form interconnected policy milestones: the former will define long-term policy direction, while the latter sets near-term operational parameters. Their combined outcomes will directly impact the U.S. dollar, global capital flows, and broad asset pricing worldwide.

 

In terms of global spillovers, Federal Reserve policy shifts exert profound cross-border effects. If Wash is successfully confirmed, his hawkish policy leanings and rigid stance on quantitative tightening risk tightening global liquidity and intensifying capital outflows from emerging markets. Conversely, concessions to political pressure and a dovish pivot would delay disinflation and lift global inflation expectations. The QT and rate guidance from the April meeting will directly move U.S. Treasury yields and the U.S. Dollar Index, subsequently rippling through global equities, bonds, and commodities. Amid conflicting pressures of rebounding inflation and geopolitical strife, even minor divergences in Fed policy communication can trigger severe global market volatility.

 

Global markets now hold their breath awaiting the outcomes of the Fed’s April policy events. From policy signals delivered at Wash’s hearing, to the QT and rate decisions at the late-April meeting, and the official leadership transition in mid-May, every stage carries latent uncertainties. Against a backdrop of resurgent inflation pressure, looming political intervention risks, and fragile global economic recovery, the Fed’s ability to balance three core objectives—price stability, economic growth, and institutional independence—will not only chart the course for the U.S. economy, but also profoundly shape global financial stability and worldwide economic recovery.