Powell "Expecting Good Relations with Trump"... Cautious Rate Cut Foreseen

"Trump Will Not Discuss 'Shadow Fed Chair'"
Repeatedly Indicates Slowing Down Monetary Easing

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), stated that he expects to maintain a good relationship with the second Trump administration, which will take office in January next year. He also believes that attempts to undermine or nullify the Fed's independence through the appointment of a 'shadow Fed chairman' will not occur. He reaffirmed the view that the U.S. economy is stronger than expected, allowing for greater caution regarding additional interest rate cuts.

On the 4th (local time), at the New York Times (NYT) DealBook Summit held in New York, Chairman Powell said that even after the second Trump administration takes office, the Fed is expected to establish the same kind of relationship with the new administration as it does with current government departments and agencies.

He said, "I fully expect that we will have the usual types of institutional relationships, such as with the Economic Advisory Council and, most importantly, the Treasury Department," adding, "Once the next Treasury Secretary (nominee Scott Wessell) is confirmed, I am confident that we will have the same kind of relationship as with previous Treasury Secretaries."

This statement came amid growing concerns about conflicts between the Fed and the next administration and potential infringements on the central bank's independence, following repeated declarations by then-President-elect Trump to dismiss Chairman Powell. Previously, Trump had strongly criticized the Fed's high interest rate policy and expressed negative views about Chairman Powell. Scott Wessell, CEO of Key Square Group and nominee for the next Treasury Secretary, proposed the idea of a shadow Fed chairman who would be appointed well before Powell's term expires in May 2026, effectively neutralizing the weight of Powell's statements in the market.

Regarding the shadow Fed chairman idea, Chairman Powell said he does not think the second Trump administration "will put such a plan on the table."

He emphasized, "I am not concerned about the risk of losing our legally mandated independence," and added, "There is very broad support for the Fed to conduct monetary policy for the benefit of all Americans, not for any particular party or political outcome."

He also reiterated that the U.S. economy's strength could allow for a slower pace of interest rate cuts. Earlier, Powell had stated last month that there was no need to rush rate cuts given the strong economy. This aligns with the minutes of the November Federal Open Market Committee (FOMC) meeting, which indicated a gradual approach to rate reductions.

Powell diagnosed, "We wanted to send a strong signal that we would provide support if the labor market continued to weaken," and added, "The economy is stronger than we expected in September." He explained that the Fed has room to be more cautious until it finds a neutral interest rate level that neither stimulates nor slows economic growth.