U.S. Federal Reserve Chair Jerome Powell stated he would not resign under pressure from Trump. The Fed cut rates by 0.25%, now at 4.5%-4.75%. Powell emphasized the Fed's independence and its commitment to managing inflation and employment. Trump criticized the Fed’s autonomy and sought influence over its decisions.
Federal Reserve Rate Cut Decision
On Tuesday afternoon, the U.S. Federal Reserve announced a 25 basis point (bps) cut to its target interest rate, setting it at 4.5% to 4.75%, as widely expected by markets.Unanimous Decision
The decision to cut rates was made unanimously by the Federal Open Market Committee (FOMC), reflecting a collective stance to maintain stable economic conditions.FOMC Statement Remained Steady
The post-meeting statement contained no meaningful changes compared to previous communications, continuing its measured tone.Balanced Risk Commentary
The FOMC statement highlighted that risks to inflation and employment remain roughly in balance and maintained a noncommittal stance on future rate changes, emphasizing that any further adjustments would be data-dependent.Chair Powell's Dovish Remarks
During the press conference, Chair Jerome Powell delivered dovish comments, expressing confidence that inflationary pressures were easing. He noted that further cooling in the labor market would be unwelcome and underscored a strategy to gradually ease toward neutral policy.Neutral Policy and Inflation Risks
Powell suggested that if inflation picks up, the Fed might slow the pace of rate cuts as rates approach neutral. However, he dismissed this as unlikely, rhetorically asking, “Where is the inflation coming from?”, and reaffirming his belief that “the economy is not tight.”Response to Treasury Yields
Powell faced multiple questions about the rise in Treasury yields and its potential impact on Fed policy. He stated that the movement had not persisted long enough to prompt a policy response from the central bank.Powell's Stance on Resignation
When asked if he would resign under pressure from a returning Trump administration, Powell firmly replied, “No.”Legal Grounds for Retention
When pressed further on whether he would be legally obligated to leave his post if asked by Trump, Powell again gave a succinct one-word answer: “No.”Election and Policy Questions Deflected
Powell fielded several questions about the potential policies of a Trump administration and their effect on the Fed but avoided direct answers, emphasizing that the central bank’s policy decisions would not be influenced by election outcomes.Overview
The rate cut marks the second consecutive reduction by the Federal Reserve as inflation continues to decline. Current rates were lowered from previous highs of 5.25% to 5.5% seen in recent years. Chair Powell reiterated that the dual mandate—managing inflation and supporting employment—remains central to Fed policy. Despite a notable slowdown in job growth and historically high inflation rates during the summer of 2022, the unemployment rate remains stable at 4.1%.
Powell’s resistance to political pressure and his firm stance on the Fed’s autonomy reflect the bank's focus on maintaining independence in monetary policy amid changing political landscapes. The Fed's actions aim to ease borrowing costs, as evidenced by mortgage rate reductions over the past year, while preserving economic stability. Powell’s term, set to end in May 2026, will continue to be shaped by his data-driven approach and unwavering adherence to central bank independence.
