Amidst swirling speculation about his future at the helm of the Federal Reserve, Chair Jerome Powell has firmly rejected any possibility of stepping down or being removed upon Donald Trump’s return to the White House. Addressing questions following the Fed’s decision to lower the benchmark interest rate by 25 basis points, Powell stated unequivocally that the president cannot legally fire him.
This declaration underscores the importance of the Fed’s independence from political pressures, a cornerstone of its ability to effectively manage the U.S. economy. While acknowledging the recent rate cut, Powell emphasized the Fed’s commitment to a data-driven approach, saying, “We don’t guess, we don’t speculate, and we don’t assume.”
The Fed’s approach to setting policy remains focused on responding to economic data. Powell described Thursday’s rate cut as a “further recalibration of policy stance” aimed at supporting the economy’s strength while continuing the fight against inflation. However, he emphasized that, despite the reduction, “policy is still restrictive,” indicating the Fed’s stance is not yet accommodative or neutral.
While acknowledging the strength of the U.S. economy, marked by steady growth and moderating inflation, Powell expressed concerns about the path of U.S. fiscal policy, warning that it is “on an unsustainable path.” He clarified that fiscal matters fall outside the Fed’s direct control, highlighting the importance of fiscal responsibility.
The Fed Chair also addressed the recent increase in Treasury yields, attributing the rise to expectations for stronger economic growth rather than a significant shift in inflation expectations. He emphasized that the labor market remains strong, with the unemployment rate at 4.1% in October, despite a sharp drop in the pace of job creation in the October nonfarm payrolls report. He attributed this decline to strikes and hurricanes rather than fundamental weakness.
Powell further highlighted the shift in labor market dynamics over the past year, with wage growth moderating and job openings declining to more sustainable levels. He asserted that labor conditions are no longer a significant source of inflationary pressure and wage gains have aligned with the Fed’s 2% inflation target.
When asked about the possibility of a December rate cut, Powell declined to give any indication, reiterating that the Fed’s decision would be guided by incoming economic data. The Fed’s commitment to remaining data-driven, independent, and focused on achieving its inflation and employment goals continues to be the cornerstone of its approach.
