The Powell Exit

The Big Story: The Powell Exit

Jerome Powell chairs his last Federal Reserve meeting. His term expires May 15, and Kevin Warsh — the former Fed Governor who has spent years arguing the central bank has been too accommodative — is the widely expected successor.

The backdrop matters. Powell leaves with the US benchmark interest rate at 3.50–3.75%, four dissents at his final meeting (the most fractured committee since 1992), and oil above $116 per barrel. He leaves with inflation back above 3%, a Strait of Hormuz that has been functionally closed for weeks, and a committee where three colleagues opposed even the hint of an easing bias in the statement. Warsh cleared the Senate committee on Friday. Confirmation is expected before the May 15 handover.

Warsh is a hawk — a central banker who leans toward keeping rates higher rather than cutting them. His 2010 dissent voted against the Fed's bond-buying programme. His writing since has repeatedly argued that the central bank's posture after the 2008 financial crisis was too loose for too long. A Warsh-led Fed arriving into a $116 oil environment, with the committee already splitting over easing language, shifts the policy centre of gravity. The rate relief that Edition #10 flagged as delayed may not simply be delayed. Under new leadership, the direction itself could reverse.

A French executive in Singapore with a variable-rate EUR mortgage assumed falling rates when she structured her refinancing window. A Spanish engineer in Abu Dhabi earning in AED has USD savings sitting in short-duration positions timed for a rate pivot. A Dutch professional in KL built a fixed income sleeve weighted toward longer-dated bonds — the trade that pays when rates fall. None of those structures are wrong. But they were built for one rate path. The chair who held that path just left the building.

What Else Is Moving

Oil, Hormuz, and "Project Freedom." Brent eased to approximately $116 after peaking near $118 earlier in the week. UAE formally exited OPEC on May 1, freeing 1.6 million barrels per day against its former quota of 3.2 million. On Saturday, Trump announced "Project Freedom" — the US Navy will begin escorting stranded ships through the Strait of Hormuz starting Monday, calling it a humanitarian gesture while warning any interference will be met with force. Iran submitted a 14-point counter-proposal demanding the war end within 30 days, the blockade be lifted, and sanctions removed — with no nuclear provisions. Trump is reviewing but doubtful. The escort plan is the first potential de-escalation mechanism since the ceasefire collapsed in April. If it works, it partially reopens transit without lifting the blockade. If Iran responds, it escalates.

Gold recovering, but the headwind is real yields. Gold rebounded to approximately $4,614 after hitting a one-month low of $4,578 earlier in the week — a sell-off driven by the central bank outlook finding a floor as geopolitical uncertainty persists. The metal is still up approximately 22% this year, but it sits roughly 17% below January's high of $5,589. The structural diversification case holds. What the pullback illustrates is that gold is not simply a geopolitical hedge: a hawkish new Fed chair raising real-yield expectations (the return you get after stripping out inflation) will push against the gold bid even if the Hormuz situation stays unresolved. The escort plan adds a new variable — any confrontation during "Project Freedom" would be immediately gold-positive.

Stock markets and a paradox. The S&P 500 closed at a fresh all-time high of 7,230 on May 1 — its strongest monthly performance since 2020 — while the VIX (the measure of how nervous investors are about the next 30 days) sits at approximately 17. The equity market is pricing resolution in the Middle East and a smooth policy landing simultaneously. The oil market, which tends to be a more direct read on geopolitical reality, is pricing neither. That divergence between stock market optimism and commodity stress is worth monitoring. It does not resolve quickly in either direction — but it rarely resolves in favour of the optimistic side when the underlying event (Hormuz) has a six-month estimated tail on resolution.

MYR holding as the net-exporter tailwind persists. USD/MYR steady at 3.97 with an appreciation bias. Oil at $116 continues to support Malaysia as a net exporter. Bank Negara holds its key rate at 2.75%, unchanged. For EUR or GBP earners spending in ringgit, the conversion continues to sit at the favourable end of the 12-month range — EUR/MYR around 4.64, GBP/MYR around 5.38. That window has been open long enough that it warrants active attention, not passive waiting.

The Expat Takeaway

The Powell transition is not a market event. It is a structural one. Leadership changes at central banks shift the policy centre of gravity over months and quarters, not days. Warsh has not taken the chair yet, has not given a single policy signal as chair-elect, and faces a committee already split four ways. The policy path will not be clear for months.

The question for expats with cross-border portfolios is whether their structure was built around a single rate assumption, and whether that assumption survives a chair who leans the other way. "Project Freedom" adds a short-term variable — if the escorts provoke a confrontation, the inflationary oil pulse intensifies. If they work, they ease it. Neither outcome changes the structural question about rates.

Three questions worth sitting with. Is your fixed income position sized for rates falling, or does it work if they stay here for another 18 months? Does your currency exposure assume a softer dollar that a hawkish central bank will not deliver? And if oil stays above $100 through the second half of 2026, which line in your household budget is the one that bends first?

If your structure holds against all three, this is a week to watch. If one of them exposes a gap, the issue predates Powell's last meeting by a considerable margin.