(Bloomberg) -- Federal Reserve Chair Jerome Powell said he would not resign from his role if asked to do so by a re-elected Donald Trump, following the Fed’s decision Thursday to lower interest rates by a quarter percentage point.
When asked at a post-meeting press conference whether he would step down if requested by Trump, Powell replied forcefully, “No.” He also said removal or demotion of any Fed board leaders, including himself, is “not permitted under the law.”
Powell said the US presidential election will have “no effects” on the central bank’s policy decisions in the near-term, noting it’s too early to know the timing or substance of any potential fiscal policy changes.
Fed officials unanimously lowered the federal funds rate to a range of 4.5% to 4.75%. The second-straight rate cut followed a larger, half-point reduction in September, extending efforts to keep the US economic expansion on solid footing.
“This further recalibration of our policy stance will help maintain the strength of the economy and the labor market and will continue to enable further progress on inflation as we move toward a more neutral stance over time,” Powell said.
His comments follow the re-election this week of Trump, who has a history of publicly criticizing the Fed chair and explored the possibility of firing Powell during his first term in the White House. Trump has also promised to deploy more aggressive tariffs, crack down on immigration and extend tax cuts — policies that could put upward pressure on prices and long-term interest rates and prompt the Fed to scale back rate reductions.
“We don’t know what the timing and substance of any policy changes will be,” Powell said. “We therefore don’t know what the effects on the economy would be, specifically whether and to what extent those policies would matter for the achievement of our goal variables: maximum employment and price stability.”
The Federal Open Market Committee said it continued to see the risks to achieving its employment and inflation goals as “roughly in balance” in a statement released Thursday. “The economic outlook is uncertain, and the committee is attentive to the risks to both sides of its dual mandate.”
Policymakers no longer included a line about achieving “greater confidence” that inflation is moving sustainably toward 2%, though they noted inflation has “made progress” toward the central bank’s goal.
The committee modified its language around the job market slightly as well.
“Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low,” the Fed statement said. Powell described the labor market as “solid.”
After beginning the Fed’s easing cycle with an outsize rate adjustment, policymakers have said they favor a more measured and careful approach to rate cuts moving forward. Powell reiterated officials are not in a hurry to reduce borrowing costs.
Robust Economy
The US economy powered ahead at a 2.8% annual rate in the third quarter, fueled by a pickup in consumer spending. Concerns about imminent labor market weakening have also abated, but data still point to a cooling trend.
US employers added just 12,000 jobs in October — restrained by severe weather and a major strike — and prior months’ figures were revised lower.
Inflation has subsided substantially in recent years, yet progress has been choppy.
From a year earlier, the rate of price increases eased to 2.1% in September, landing just above the central bank’s 2% goal. The Fed’s preferred gauge of underlying inflation, meanwhile, posted its biggest monthly gain since April.
Traders saw a quarter-point cut Thursday as a near certainty. Futures markets show a high probability of another similar-sized cut in December.
Treasury yields climbed rapidly in the run-up to the election, pushing up mortgage rates in an already chilled housing market. The S&P 500 climbed to a record high in the wake of Trump’s victory.
Powell said the Fed was paying attention to the march higher in longer-term bond yields and attributed it to perceptions of stronger growth. He also said bond rates would have to stay elevated before the central bank made a conclusive assessment about their economic impact.
--With assistance from Matthew Boesler, Kevin Varley, Amara Omeokwe and Alex Harris.
(Adds additional comments from Powell starting in seventh paragraph.)
©2024 Bloomberg L.P.