Latest news with #FedGovernors
Zawya
18 hours ago
- Business
- Zawya
Powell repeats rate cuts can wait as Fed studies tariff impacts
U.S. Federal Reserve Chair Jerome Powell said on Tuesday the central bank needs more time to see if rising tariffs drive inflation higher before considering the interest rate cuts that President Donald Trump is demanding. "Increases in tariffs this year are likely to push up prices and weigh on economic activity," Powell said in testimony prepared for delivery this morning at a hearing before the House Financial Services Committee. "The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance." Powell's testimony largely reiterates the central bank's most recent policy statement approved last week when Fed officials voted unanimously to hold the benchmark interest rate steady in the current 4.25% to 4.5% range, and gave no indication rate cuts were imminent. New economic projections released at the time showed officials at the median expect two quarter-point rate cuts by the end of the year, with investors anticipating the first to come at the Fed's September meeting. In recent days two Fed governors, both Trump appointees, have said rates could fall as soon as the July meeting given inflation has not yet risen in response to tariffs, while two reserve bank presidents say they still worry inflation will intensify over the rest of the year. Trump, who appointed Powell as chair in his first term but is expected to replace him when his term ends next spring, has repeatedly called for steep rate cuts. "We should be at least two to three points lower," he said in a social media post ahead of the hearing, adding in reference to Powell that he hoped "Congress really works this very dumb, hardheaded person, over." Powell has built strong alliances in Congress over his three terms as Fed chair, often getting plaudits from Republicans and Democrats for his oversight of the Fed. In his prepared testimony Powell said the economy remains in a "solid position," with low unemployment and inflation far below its pandemic-era peak. But much about Trump's ultimate trade policies remain in flux, with a July 9 deadline approaching for higher tariffs on a large set of countries. The outcome of that policy shift will be critical for the Fed to understand, Powell said. "Policy changes continue to evolve, and their effects on the economy remain uncertain," Powell said. (Reporting by Howard Schneider; Editing by Andrea Ricci)
Yahoo
a day ago
- Business
- Yahoo
Fed's Powell faces Congress as Trump rate pressure intensifies
Federal Reserve Chair Jerome Powell faces intensifying pressure for rate cuts from the White House and even some of his fellow central bank policymakers as heads to Capitol Hill Tuesday for his semiannual testimony to Congress. He is likely to tell House lawmakers today that the Fed can afford to hold rates steady as officials evaluate the unknown effect of President Trump's trade policies on inflation — a stance he emphasized last week after the central bank kept monetary policy unchanged for the fourth consecutive meeting. Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments Powell's wait-and-see approach is inflaming tensions with Trump, who continues to hammer Powell and the central bank to cut rates. The president's attacks intensified at the end of last week as Trump called for rates to drop from 4.25%-4.5% to between 1% and 2% and said of Powell and the Fed's Board of governors: "I don't know why the Board doesn't override this Total and Complete Moron!" He also mused once more about removing Powell before his term as chair ends next May, an option he previously said he had rejected. "Maybe, just maybe, I'll have to change my mind about firing him?" Trump posted. "But regardless, his Term ends shortly!" Trump is not the only one calling for lower rates. Even some of Powell's fellow policymakers — Fed governors Michelle Bowman and Chris Waller — have said in recent days that they now see cutting rates as soon as the Fed's next policy meeting in July due to mild inflation readings of late. Bowman made the argument for such a move in a speech Monday, saying that inflation has declined or come in below expectations over the past several months and asserting that trade policy will only amount to "minimal impacts" on the Fed's preferred inflation measure. She also cited concerns that downside risks to employment could "soon become more salient, given recent softness in spending and signs of fragility in the labor market." The comments from Bowman and Waller are not the only sign of an increasing divide within the Fed. There was also a difference of opinion evident last week in the Fed's latest "dot plot" outlining future interest rate moves. While eight officials saw two cuts still happening in 2025, seven officials predicted no cuts at all — up from the four officials who made that call previously. Powell noted last week that recent inflation reports have been favorable, but that goods prices have been moving up following the introduction of new tariffs and there could be more of that this summer. "We're beginning to see some effects, and we do expect to see more of them over the coming months," he told reporters last Wednesday. Thus, the right thing to do for now, he added, is 'hold where we are' on rates. If asked about Trump's pressure Tuesday, Powell is likely to brush off any criticism from the president, saying that it doesn't interfere with his job and that he plans to serve out his full term, slated to end in May 2026. He will also likely be asked how Trump's strikes on three Iranian nuclear sites affect the path forward as central bank officials gauge the full impact of the president's trade, tax, and immigration policies on the path of inflation and economic growth. On Monday evening Trump said Israel and Iran had agreed to a cease-fire that he said could lead to the end of the war between the countries. Some Fed watchers worry that any sustained increase in oil prices would add to the inflationary impulse already present in the US from Trump's tariffs. Wall Street analysts at JPMorgan Chase (JPM) have warned that a prolonged conflict and the potential closure of the critical Strait of Hormuz could drive oil prices as high as $120 a barrel, pushing US inflation back toward 5%. That could bolster the argument of some hawks at the Fed that rates need to stay where they are for longer to protect against another inflation surge. On the other hand, there is also an argument circulating on Wall Street that any new conflict in the Middle East could push the Federal Reserve to cut interest rates sooner than expected. Trump said Friday that if Powell is concerned about inflation or anything else, then 'all he has to do is bring the rate down, so we can benefit on interest costs, and raise it in the future when and if these 'other elements' happen.' Click here for in-depth analysis of the latest stock market news and events moving stock prices
Forbes
21-05-2025
- Business
- Forbes
Miki Bowman's Confirmation Troubles Reveal The Fed's Political Colors
Why isn't Donald Trump-nominee Miki Bowman on a glide path to approval as Federal Reserve Vice Chairman? The answer is politics. Though the central bank's partisans will claim in breathy tones that the Fed's thinking and decisions aren't compromised by the tawdry politics that so many associate with Washington, the reality is quite different. And it's rooted in the unspoken truth that while independent in theory, there's little allowance for independent thinking inside the Fed. Consider past Fed nominee, Judy Shelton. Shelton had the credentials, including a PhD in economics that Fed Chairman Jerome Powell lacks. The problem? Shelton was a known proponent of stable money as a measure of value, as in Shelton was known to prefer a commodity standard to achieve dollar-price stability as a replacement for the dollar instability foisted on us by fallible PhDs. Notable about Shelton's views was that she was nominated not for Fed Chairman, but Governor. More to the point, even if Shelton had been the nominee to run the Fed, there still would have been no way for her to impose her monetary views on the central bank. For one, the Fed prizes consensus, and the consensus among Fed officials has long been that commodity, or gold standard systems of dollar management are hopelessly outdated. Second, the dollar's exchange value has never been part of the Fed's policy portfolio as is. Yet precisely because Shelton revealed a streak of independent thought, her nomination was met with all sorts of criticism. Implied in her failure to attain approval was that independence at the Fed is much more an affectation than it is reality. With Bowman, she's been known to stray from rate cutting consensus on occasion, but more troubling to the rigid minds inside the central bank, Bowman is a bit more skeptical about the worth of bank capital requirements. Bowman's skepticism is warranted, which is not a political assertion. In truth, it's just a comment that markets are incredibly complicated. To see why, contemplate this question: what should interest rates be? Tick tock, tick tock. It's not simple to answer precisely because rates of interest are a consequence of infinite decisions made every second of the day by individuals, financiers, and producers around the world. In other words, an interest rate is an effect of wildly sophisticated markets at work. The correct amount of bank capital is no different. And it's no different from interest rates exactly because no bank is the same. What should the capital requirement for banks be? That's like asking what the interest rate should be. Markets will quite simply tell banks how much capital they should have in reserve. Despite this, Fed officials want to decree specific capital requirements, or want to defer to Basel III. Ok, but why the deference? Will regulators do a better job than the markets? It's a question worth asking. In Bowman's case, it's not as though she wants to aggressively turn away from Fed oversight and Basel on the matter of capital requirements, but it's that she's a bit more skeptical about how effective top-down rules are. Meaning, Bowman would be a good voice of occasional opposition inside the Fed such that decisions would be informed by a greater range of thinkers. But for one problem, the Fed disdains independent thinking more than it does its reputation for independence. So, here we are. Bowman's years at the Fed make her eminently qualified, but those same years seem to have unearthed in the nominee an independent streak that is plainly not allowed. Some would say Bowman's problems are political, and they would be right.
