Powell: "Won't step down even if Trump demands resignation"... US benchmark interest rate cut by 0.25% (Update)

Powell "President's Dismissal of Fed Chair Is Illegal"
Fed Cuts Interest Rate by 0.25%p to 4.5-4.75%
Slows Down Rate Cuts After Big September Cut

"I will not step down (No). It is not legally permissible for the President to dismiss the Chair of the U.S. Federal Reserve (Fed)."

Jerome Powell, Chair of the Fed, clearly stated his intention to remain in office even if Donald Trump, the President-elect who won the 47th U.S. presidential election, demands his resignation. He also emphasized that the election results would not have a short-term impact on the Fed's monetary policy. While Powell expressed confidence that strong growth and a slowdown in inflation could be achieved simultaneously, as expected, the Fed lowered the benchmark interest rate by 0.25 percentage points at the November Federal Open Market Committee (FOMC) meeting. After initiating the easing cycle with a 'big cut' (0.5 percentage point rate cut) in September, the Fed appears to be moderating the pace of rate cuts.

At a press conference held immediately after the regular FOMC meeting on the 7th (local time), Chair Powell was asked whether he would step down if President-elect Trump demanded his dismissal, to which he firmly replied, "I will not leave."

Until now, President-elect Trump has repeatedly expressed dissatisfaction with the Fed's rate hikes and vowed to dismiss Chair Powell if he returns to the White House. Powell’s remarks at the press conference revealed his stance on his tenure. He specifically mentioned that it is not legally permissible for the President to dismiss the Fed Chair. Powell, who was appointed during the Trump administration in 2018, had his term extended under the Biden administration until June 2026.

Although Powell declined to comment on the election or political issues amid the press's aggressive questioning related to the election, his clear statement about his tenure is interpreted as a demonstration of his commitment to maintaining the Fed's political independence. He also emphasized that "in the short term, the election results will not affect our monetary policy decisions."

On the same day, the Fed lowered the benchmark interest rate by 0.25 percentage points as expected, from the previous 4.75?5.0% range to 4.5?4.75%. The decision was unanimous. This is the second rate cut since the Fed initiated the easing cycle with a big cut in September, the first rate cut in two years and six months since the rate hike in March 2022. This time, the cut was reduced to 0.25 percentage points.

At the press conference, Chair Powell said, "We are committed to maintaining a strong economy," and added, "I am confident that through appropriate policy adjustments, we can achieve both a resilient economy and a continued slowdown in inflation simultaneously."

When asked about revisions to economic outlooks due to policies of the next administration, he replied that it was premature to comment at this time. However, regarding concerns about the expanding U.S. fiscal deficit, he stated, "The U.S. debt is unsustainable" and assessed it as "a threat to the economy." The market is increasingly worried that President-elect Trump's tax cut promises will lead to an expanded fiscal deficit and increased federal government debt.

On the day, the Fed assessed that the U.S. economy is maintaining a solid expansion, and inflation is slowing, balancing the achievement of full employment and price stability.

In the policy statement, the Fed said, "We aim to achieve maximum employment and 2% inflation in the long term," and "The Committee judges that risks to the attainment of employment and inflation objectives are roughly balanced." Regarding the labor market, it evaluated that "conditions have generally eased, and the unemployment rate has risen but remains low." Economic activity is "expanding at a solid pace."

Inflation was assessed as continuing to decline. In the policy statement released that day, the Fed removed the phrase expressing "greater confidence" that inflation is slowing sustainably toward 2%. Instead, it stated that inflation is "still somewhat elevated but has made progress toward the Committee's 2% goal." Regarding this, Chair Powell explained it as "a measure not to provide guidance on the future path of interest rates."

Anna Wong, an economist at Bloomberg Economics, said, "This revision of the policy statement suggests that the Fed will place more weight on full employment and ease its focus on the price stability goal," adding, "As the Fed continued the rate cut cycle by lowering rates by 25 basis points (1bp = 0.01 percentage points) at this FOMC, we expect an additional 25bp cut at the December FOMC."