Federal Reserve Chair Jerome H. Powell is confident the central bank will maintain its independence, despite signals from President-elect Donald Trump about taking a more hands-on approach to Fed policy.
Fed independence gives “us the ability to make these decisions for the benefit of all Americans, at all times, not for any political party or political outcome,” Powell said Dec. 4 at the DealBook Summit in New York. “We’re supposed to achieve maximum employment and price stability for the benefit of all Americans and keep out of politics completely.”
Powell was asked several questions about the incoming Trump administration and whether that independence will be eroded.
“I’m not concerned that there’s some risk that we would lose our statutory independence, because I do think that those … ideas are strongly believed by people” in both parties, Powell said.
At an event in October, Trump, who in his first term nominated Powell as Fed chair and later threatened to fire him, said of interest rate decisions, “I think I have the right to say, ‘I think you should go up or down a little bit.’ I don't think I should be allowed to order it, but I think I have the right to put in comments as to whether or not interest rates should go up or down.”
Since Trump’s election last month, Powell has been asked if we would resign his post if asked and if Trump can legally require him to leave. Powell has said no to both questions. His term expires in 2026.
Powell on Dec. 4 was also asked about comments made by Scott Bessent, the hedge fund executive Trump plans to nominate for Treasury secretary. In October, Bessent floated an idea in an interview with Barron’s to reduce Powell’s influence. “You could do the earliest Fed nomination and create a shadow Fed chair,” Bessent said. “And based on the concept of forward guidance, no one is really going to care what Jerome Powell has to say anymore.”
Powell said he doesn’t think that idea is “on the table” and expects to have a positive relationship with Bessent if he’s confirmed.
Speaking earlier in the day at the DealBook Summit, Ken Griffin, the founder, CEO and co-CIO of $65 billion hedge fund Citadel, said the Fed’s independence is “extraordinarily important to the sanctity of the dollar.”
“I truly believe that the independence of the Fed, whether it’s from President Trump or any former president, is incredibly important to the preservation and strength of our economy,” Griffin said.
Griffin noted that part of the Fed chair’s role is to make “the really tough decisions that the body politic often is afraid to make.”
Asked how Griffin would grade Powell’s job thus far, he said, “Powell has had one of the worst jobs you could have, because the Biden administration, in their reckless fiscal spending put this country on an inflationary path that was unprecedented in our lifetime, and he's had to deal with cleaning up the mess of that fiscal largesse, just as this administration is going to have to clean up that mess. So, he's had a really tough no-win job over the last few years.”
The Federal Open Market Committee, which has cut rates at its last two meetings, will meet next Dec. 17-18. Market participants predict there is a 76% chance the committee will initiate another quarter-point cut at that meeting, according to the CME FedWatch Tool that tracks trading in the 30-day fed funds futures.
