Federal Reserve Chairman Jerome Powell seemed to take a subtle swipe at President Trump during a speech on Tuesday in New York, warning of “short-term political pressure” that can damage the U.S. central bank’s independence.
“Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests,” Powell said during a speech at the Council on Foreign Relations. “Central banks in major democracies around the world have similar independence.”
Powell’s speech comes on the heels of last week’s Federal Open Market Committee two-day policy-setting meeting, during which Trump urged the Fed to lower interest rates. However, policymakers voted 9-1 to keep the benchmark federal funds rate steady at 2.25 percent to 2.5 percent, although heavily implied there could be a rate cut this year.
The president took to Twitter on Monday to reiterate his frustration with the U.S. central bank, and Powell, whom he has reportedly considering firing (in an interview with The Hill, Trump maintained that he had the power to fire Powell, but said he had “no plans to do anything”).
“We are on course to have one of the best Months of June in US history. Think of what it could have been if the Fed had gotten it right,” Trump wrote. “Thousands of points higher on the Dow, and GDP in the 4’s or even 5’s. Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it!”
But Powell stressed the importance of an independent central bank during the speech, which investors were closely watching for signals that the Fed may cut rates during its July meeting.
Still, Powell gave no additional signs that a benchmark federal funds rate reduction is coming within the next six weeks, although he did say that risks to the Fed’s economic outlook have grown.
“The crosscurrents have reemerged, with apparent progress on trade turning to greater uncertainty and with incoming data raising renewed concerns about the strength of the global economy,” he said. “Our contacts in business and agriculture report heightened concerns over trade developments.”