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Fed Chair Powell Confident in Central Bank’s Independence Amid Transition

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the staff of the Ridgewood blog

New York NY, Federal Reserve Chair Jerome Powell expressed confidence Wednesday that the central bank will remain independent under the incoming administration of President-elect Donald Trump. Speaking at the New York Times DealBook Summit, Powell addressed concerns over potential political interference in the Federal Reserve’s decision-making processes.

Reassurance on Fed Independence

Speculation has grown in recent months that Trump might attempt to influence the Federal Reserve, possibly through legislation or by appointing a “shadow chair” to undercut Powell’s authority. However, Powell emphasized the safeguards built into the Fed’s foundational legislation, designed to insulate it from political pressures.

“What does independent mean? It means we can make our decisions without them being reversed,” Powell explained during an interview with CNBC’s Andrew Ross Sorkin. He added that the Fed’s mandate focuses solely on serving the American people by achieving maximum employment and stable prices, devoid of political agendas.

No Hints on Interest Rates

While Powell did not provide specific insights into the Fed’s upcoming interest rate decisions, he noted that the current strength of the U.S. economy allows the central bank to proceed with caution.

“The U.S. economy is the envy of other large economies around the world,” Powell remarked, signaling that the Fed has the flexibility to be deliberate in its policy adjustments.

Market analysts predict a 75% chance of a quarter-point rate cut at the Federal Open Market Committee meeting in two weeks, with additional cuts anticipated in 2025.

Historical Tensions and Future Outlook

During Trump’s first term in office, he frequently criticized Powell and the Fed over its monetary policy decisions, advocating for presidential influence on interest rates. Despite these tensions, Powell remains optimistic that Congress will uphold the Fed’s independence.

“There is very, very broad support for that set of ideas in Congress, in both political parties on both sides of the Hill,” Powell said. “It’s the law of the land, and I’m not concerned that there’s some risk that we would lose our statutory independence.”

A Stable Foundation for the Fed

As the Fed prepares for its next rate decision and the country transitions to a new administration, Powell’s confidence in the institution’s independence highlights its crucial role in navigating economic policy free from political influence.

With strong bipartisan support and a robust legal framework, the Federal Reserve is poised to continue serving the American people, regardless of the shifting political landscape.

 

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