Powell's Remarks at NYT DealBook Summit in New York
"No Concern Over Independence Erosion... Broad Support for Fed"
November Beige Book... Slight Increase in Economic Activity
Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), is expected not to appoint a 'shadow Fed chairman' who would undermine the authority of President-elect Donald Trump, who will take office in January next year. He also reaffirmed his previous stance that the U.S. economy is stronger than expected, which would lead to a more cautious approach toward further interest rate cuts.
On the 4th (local time), at the New York Times (NYT) DealBook Summit held in New York, Chairman Powell said regarding the possibility that President-elect Trump might nominate the next Fed chairman early to weaken his position, "I don't think such an option will be put on the table."
He stated, "I fully expect that we will maintain the usual institutional relationships, such as with the Council of Economic Advisers and, most importantly, the Treasury Department," adding, "Once the next Treasury Secretary (nominee Scott Wessell) is confirmed, I am confident that we can have the same kind of relationship as with previous Treasury Secretaries."
This remark came amid growing concerns about potential conflicts between the Fed and the next administration and the infringement of the central bank's independence, as President-elect Trump has repeatedly declared his intention to dismiss Chairman Powell upon taking office. Previously, Trump had strongly criticized the Fed's high interest rate policy and expressed a negative view of Chairman Powell. In particular, 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 nominated well before Powell's term expires in May 2026, effectively neutralizing the weight of Powell's statements in the market.
Chairman Powell 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 hinted again that the U.S. economy is stronger than expected, which could slow the pace of interest rate cuts. Earlier, Powell had stated last month that there was no need to rush rate cuts due to the strong economy. This aligns with the minutes of the November Federal Open Market Committee (FOMC) meeting, which indicated a gradual approach to rate cuts.
He 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.
In the Beige Book, a report on economic trends released by the Fed that day, economic activity was found to have increased slightly last month. The Fed evaluated in the November report that "although the pace of economic growth was generally modest, expectations for growth rose moderately across most regions and sectors." It further explained, "Surveyed businesses expressed optimism that demand would increase in the coming months," and "consumer spending was generally stable."
Some companies in the jurisdictions of the Philadelphia Fed and the St. Louis Fed expressed concerns that President-elect Trump's tariff policies could increase inflation risks.
The Beige Book is a report assessing economic conditions across the 12 Federal Reserve districts. It serves as foundational material for the regular Federal Open Market Committee (FOMC) meeting scheduled for the 17th and 18th.
The market is pricing in a high probability that the Fed will cut the benchmark interest rate by 0.25 percentage points this month and hold it steady in January. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market on that day reflected a 77.5% chance of a 0.25 percentage point rate cut at the December FOMC meeting and a 22.5% chance of no change. The probability of a rate hold in January following the December small cut (0.25 percentage points) is 64.5%.
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