In a wide-ranging interview at the annual DealBook Summit, Federal Reserve Chair Jerome Powell emphasized the importance of Fed independence. Powell reassured that the U.S. central bank is unlikely to lose its independence under the incoming Trump administration, citing that the Fed’s statutory independence is strongly supported. He reiterated that the Fed’s independence allows it to make monetary policy decisions for the benefit of all Americans, regardless of political influence. Powell also highlighted the self-funded nature of the Fed, which operates independently and transfers earnings to the Treasury. Powell dismissed the idea of a shadow Fed chair proposed by Treasury secretary nominee Scott Bessent, emphasizing the importance of trust and respect between institutions. Powell expressed confidence in maintaining a good relationship with the Trump administration and stressed the importance of independence and collaboration during times of crisis. Powell also mentioned that he has not experienced undue White House influence during his tenure. Additionally, Powell refrained from discussing future policy decisions but hinted at a cautious approach to monetary policy adjustments. The economy continues to show strength, and there is little reason to question the stability of current economic conditions.
While Federal Reserve Chair Jerome Powell did not disclose any hints about upcoming monetary policy decisions, other Fed officials have discussed their views on interest rates. It seems likely that more interest rate cuts will occur in 2025, although the pace of these cuts is still up for debate.
Minutes from the recent Federal Open Market Committee meeting indicated that officials are leaning towards lowering interest rates more gradually. St. Louis Federal Reserve President Alberto Musalem suggested at a recent conference that it may be time to ease monetary policy, but policymakers should also consider slowing down the rate of easing.
Fed Governor Christopher Waller believes that further rate cuts are necessary until a more neutral policy rate is achieved. Despite signs of inflation surpassing 2 percent, Waller is in favor of another rate cut at the upcoming meeting.
Recent data shows an increase in all three inflation metrics, pointing towards a possible need for further rate adjustments. The Fed is scheduled to meet on December 17 and 18.
According to the CME FedWatch tool, investors are anticipating a quarter-point interest rate cut, which would bring the federal funds rate down to between 4.25 percent and 4.5 percent.
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