Powell Lays Out Potential Impacts on Fed's Policy Framework Amidst Pressure
Powell, Chair of the Federal Reserve, holds discussion with Trump at the White House.
In a candid exchange, Federal Reserve Chair Jerome Powell discussed the potential adjustments to the central bank's policy framework in light of surging inflation and recurring supply shocks.
Powell recently met with President Donald Trump at the White House during Trump's second term. The discussion apparently focused on economic matters, but Powell steered clear of disclosing any expectations regarding monetary policy, stressing that the policy path would depend solely on incoming data and its implications for the economic outlook.
Additionally, Powell assured that the Fed will set monetary policy to support maximum employment and price stability, solely based on objective and non-political analysis. However, the ongoing calls from the White House for lower interest rates and a broader desire to hold more sway over monetary policy have created a tense atmosphere.
Recent minutes from the May FOMC meeting reveal that the Fed foresaw potential risks of economic instability, inflationary pressures, and joblessness.
President Trump has repeatedly pressured Powell to lower interest rates, arguing that his policy stance puts the U.S. economy at a disadvantage compared to China and other nations. During a press briefing, White House Press Secretary Karoline Leavitt confirmed that Trump expressed his disappointment over Powell's reluctance to lower rates, but there were no indications that the president planned to remove Powell from his position.
Powell, a Trump appointee, has maintained his stance that he wouldn't resign early if asked to do so and has reiterated that the president doesn't have the power to terminate him without cause.
Economic experts from Goldman Sachs claim that undermining the independence of central banks could have profound consequences, such as increased inflation, decreased stock prices, and a weaker currency. Granted, safeguarding central bank independence is crucial to maintaining stable prices and fostering economic growth.
Any erosion of this independence could result in a myriad of challenges, including inflationary pressure, increased risk premia, currency devaluation, reduced economic growth, and market instability. As such, preserving the Fed's independence remains an essential goal for ensuring a robust and stable economy.
- The ongoing calls from the White House for lower interest rates, as well as the desire to hold more sway over monetary policy, have created a tense atmosphere, potentially impacting the Fed's policy-and-legislation towards inflation and interest rates.
- In a press briefing, White House Press Secretary Karoline Leavitt confirmed that President Trump expressed his disappointment over Powell's reluctance to lower interest rates, this echoes in the general-news domain where Trump has repeatedly pressured Powell to lower interest rates.
- Economic experts from Goldman Sachs argue that undermining the independence of central banks could have profound consequences, such as increased inflation, decreased stock prices, and a weaker currency, emphasizing the importance of maintaining the Fed's independence to foster a robust economy.
