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Presidential hopeful Donald Trump has been dropping not-so-subtle hints about when he wants the Fed to begin cutting rates\u2014but chairman Jerome Powell isn\u2019t interested<\/a>. <\/p>\n This week the Federal Open Market Committee (FOMC) met to discuss whether the base rate\u2014currently at a more than two-decade high\u2014should be lowered<\/a>.<\/p>\n While the economy is still warm enough to cause concern that making money cheaper by dropping the base rate<\/a> would lead to inflation, some members of the Fed have begun teasing a cut following their next meeting in September.<\/p>\n A reduction in the targeted 5.25% to 5.5% base rate<\/a> would ease pressure on consumers, who might then view the Biden administration\u2019s handling of the economy more favorably as a result.<\/p>\n This is precisely the opposite of what Trump wants to happen. <\/p>\n The Republican candidate told Bloomberg<\/a> a base rate reduction ahead of the November election is \u201csomething that [the Fed] know they shouldn\u2019t be doing.\u201d <\/p>\n The Fed is supposed to be a nonpartisan, politically independent entity. Powell was keen to drive this detail home in a speech<\/a> following the conclusion of the FOMC meeting yesterday. Responding directly to a question about Trump\u2019s criticism of a pre-election cut, Powell said he \u201cabsolutely\u201d believes any decision the Fed makes will be apolitical.<\/p>\n \u201cFirst of all, we haven\u2019t made any decisions,\u201d he began. \u201cI don\u2019t know what the data will reveal or how that will affect the appropriate path of our policy.\u201d<\/p>\n \u201cI do know how we will make that assessment \u2026 so if you take a step back, the current situation is inflation has come down much closer to our goal, and that\u2019s happened while unemployment has remained low. We\u2019re very tightly focused on using our tools to try to foster that state of affairs continuing.\u201d<\/p>\n \u201cEach of our meetings and all of our decisions are focussed strictly on that and really on nothing else<\/a>.\u201d<\/p>\n All of that would sound reasonable and anodyne, if it had come from anyone else. But for a Fed chairman \u2014 who knows even the slightest misstep when speaking will move global markets \u2014 those are fighting words.<\/p>\n His response came after years of Trump\u2019s continual attempts to embroil both Powell and the Fed in political dialogue.<\/p>\n Back in February the former president told Fox Business Network<\/a> that Powell is \u201cgoing to do something to probably help the Democrats, I think, if he lowers interest rates\u201d. He continued that Powell was \u201cpolitical\u201d, adding: \u201cIt looks to me like he\u2019s trying to lower interest rates for the sake of maybe getting people elected, I don\u2019t know.\u201d <\/p>\n In his press conference Wednesday Powell resoundingly rejected this idea. \u201cWe\u2019re a non-political agency,\u201d he said. \u201cWe don\u2019t want to be involved in politics in any way.\u201d<\/p>\n Powell was nominated by Trump when the latter was president in 2017. He was then re-recommended for the chairman role by President Biden in 2021. Since then, Trump has questioned his job security.<\/p>\n The Republican nominee said in February he wouldn\u2019t reappoint Powell if he won the election, though walked back this stance in last month\u2019s Bloomberg interview. <\/p>\n \u201cI would let [Powell] serve it out,\u201d Trump said, \u201cespecially if I thought he was doing the right thing.\u201d<\/p>\n That said, it hasn\u2019t stopped Trump from suggesting who he would hire to replace Powell<\/a>. His list of\u2014potentially unwilling\u2014candidates include JPMorgan CEO Jamie Dimon, who has repeatedly said he has no interest in such a role<\/a>.<\/p>\n Powell has said he has no plans to leave the chairman\u2019s office before his term is up<\/a>, but likewise was unswayed by how the Fed\u2019s decision will land with politicians.<\/p>\n \u201cCongress has, we believe, ordered us to conduct our business in a non-political way at all times\u2014not just some of the time,\u201d Powell said Wednesday. \u201cWe never use our tools to support or oppose a political party, a politician or any political outcome.\u201d<\/p>\n \u201cThe bottom line is if we do our very best to do our part and we stick to our part, that will benefit all Americans. If we get it right, the economy will be stronger, we\u2019ll have price stability, people will find jobs, wages will rise in real terms\u2014everyone will benefit.\u201d <\/p>\n The former\u00a0undersecretary of the treasury under Republican President George H.W. Bush, Powell pointed out he had worked with the Fed throughout four presidential elections, having first joined the organization in 2012.<\/p>\n \u201cThat\u2019s how we will always act \u2026 this is how we think about it, this is what we do,\u201d he said. \u201cAnything that we do before, during or after the election will be based on the data, the outlook and the balance of risks\u2014and not on anything else.\u201d <\/p>\n Powell added that while the Fed is abreast of the comment and insight from scholars and analysts, \u201cwe don\u2019t change anything in our approach to address other factors like the political calendar.\u201d <\/p>\n The Fed is indeed facing mounting pressure from doves and hawks alike on when to cut. Some, such as Bill Dudley<\/a>, the former president of the Federal Reserve Bank of New York, said ahead of the FOMC July meeting that the Fed needs to\u00a0cut rates as soon as possible<\/a>.<\/p>\n Other analysts, such as those at Bank of America<\/a>, are holding out for a cut as late as December. In a note published yesterday seen by Fortune<\/em>, U.S. economist Michael Gapen, rates strategist Mark Cabana and FX strategist Alex Cohen wrote: \u201cWe still forecast the first rate cut in December since we think downside risks to the economy are overstated.\u201d<\/p>\n Despite his most-recent nomination coming from the Democratic Party, Powell may also get a lukewarm reception if Kamala Harris is elected to the Oval Office.<\/p>\n Harris\u00a0voted<\/a>\u00a0against Powell\u2019s confirmation as Federal Reserve chair in 2018 when she was in the Senate, siding instead with a bloc of progressive lawmakers.\u00a0<\/p>\n Though Powell was reappointed while Harris served<\/a> as Vice President, political commentators believe there is a \u201cvery low probability\u201d<\/a> that once his term is up in 2026 he will earn another nomination from either candidate.<\/p>\n On the question of Trump vs Harris\u2014and their different economic approaches\u2014Powell said their policies won\u2019t impact forecasts. <\/p>\n \u201cWe absolutely do not do that,\u201d he said. \u201cWe don\u2019t know who\u2019s going to win, we don\u2019t know what they\u2019re going to do \u2026 we just can\u2019t do that.\u201d <\/p>\n While the Fed could run simulations of economic policies proposed by either Republicans or Democrats, he reiterated: \u201cWe would never try to make policy decisions based on the outcome of an election that hasn\u2019t happened yet\u2014that is a line we would never cross.\u201d <\/p>\n<\/div>\n\n\u2018We don\u2019t want to be involved in politics in any way\u2019<\/h2>\n
Powell\u2019s job is on the line<\/h2>\n
Kamala Harris may have little allegiance<\/h2>\n
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