Fed's Powell: Trump's Policies Uncertain, No Rush to Cut Rates

Federal Reserve Chair Jerome Powell has expressed caution regarding the potential impact of President-elect Donald Trump's proposed economic policies on the U.S. economy. In a recent speech, Powell emphasized that the Fed will monitor the path of inflation and adjust its monetary policy accordingly, but he is not ready to say what Trump's policies will do to the economy.

Powell's remarks come as the Fed is expected to cut its key interest rate later this month, following a quarter-point reduction in September. However, the Fed's steps after that are much less clear. In September, the central bank's officials collectively signaled that they envisioned cutting their key rate four times in 2025. Wall Street traders, though, now expect just two rate reductions, according to futures pricing tracked by CME FedWatch.



Powell's cautious remarks suggest that the Fed is taking a wait-and-see approach to Trump's proposed policies, such as tariffs and tax cuts. While Powell acknowledged that the economy is strong, he emphasized that the Fed can afford to be more cautious with cutting rates. This approach allows the Fed to monitor the path of inflation and adjust its monetary policy as needed.



Powell's comments also highlighted the importance of the Fed's independence in maintaining low inflation and economic stability. He emphasized that the Fed will not be influenced by political considerations and will remain committed to its mandate. However, Trump's public comments and attempts to influence monetary policy could potentially erode public confidence in the Fed's ability to maintain low inflation over time.

In conclusion, Powell's remarks indicate that the Fed is taking a cautious approach to Trump's proposed economic policies. While the Fed is expected to cut its key interest rate later this month, the Fed's steps after that are much less clear. The Fed will continue to monitor the path of inflation and adjust its monetary policy accordingly, but Powell is not ready to say what Trump's policies will do to the economy. The Fed's independence and credibility are crucial for maintaining low inflation and economic stability, and Powell has emphasized the Fed's commitment to its mandate.