Fed holds rates at 3.5%-3.75%, signals easing bias amid leadership change and policy debate.

The Federal Reserve kept interest rates steady at 3.5%-3.75% during Jerome Powell's final meeting as Chairman, maintaining an easing bias despite growing internal disagreements about future policy. Incoming Chairman Kevin Warsh advocates ending quantitative easing, reducing forward guidance, and adopting a more flexible policy approach with potential rate cuts and a broader inflation target influenced by AI-driven productivity gains. Powell's continued role as governor is expected to moderate abrupt policy shifts and preserve consensus-driven decisions, lowering the chance of immediate rate cuts. These developments highlight a transitional phase for Fed policy amid differing views on inflation and economic growth.