US Federal Reserve Chair Jerome Powell on Wednesday downplayed the prospects of tension with the incoming administration of US president-elect Donald Trump and said he expects officials could move cautiously as they continue lowering interest rates.
“We can afford to be a little more cautious as we try to find neutral,” Powell said in reference to the level for rates that neither spurs nor restrains the economy.
The Fed’s preferred measure of underlying inflation accelerated in October on an annual basis, offering support for a careful approach to further reductions. Meanwhile, Powell said downside risks to the jobs market appear to have receded.
Photo: AP
Policymakers would next meet on Dec. 17 to 18 in Washington. The Fed chair did not say whether he favored lowering rates at that meeting. However, after the remarks, multiple analysts said they anticipate the Fed would cut rates by a quarter point this month and then hold steady at next month’s gathering.
Asked about Trump and Treasury nominee Scott Bessent, Powell expressed confidence he could work well with the incoming administration.
“I fully expect that we’ll have the same general kinds of relationships, institutional relationships, for example with the Council of Economic Advisers, but most importantly with the Treasury Department,” Powell said at the New York Times DealBook Summit in New York.
On Bessent, Powell said he was “confident that I will have the same kind of relationship with him once he’s confirmed as I’ve had with other Treasury secretaries.”
Bessent has previously floated the idea of naming a “shadow Fed chair” well in advance of the end of Powell’s term in 2026, a move that would effectively undermine the Fed leader’s influence with financial markets.
Powell said he did not believe the incoming administration would pursue that idea.
“I don’t think that’s on the table at all,” he said.
He also said the economy is “in remarkably good shape,” adding growth has been stronger than previously believed.
“I feel very good about where the economy is and where monetary policy is,” he said.
Powell added that inflation is still not quite back to the central bank’s 2 percent target, but he saw no reason solid economic conditions could not continue.
Fed officials have lowered rates by three-quarters of a percentage point since September and several of them have said the Fed should continue lowering rates from current levels, which they view as having a restraining effect on the economy, given a cooling of inflation.
Still, officials have said the pace and timing of cuts would depend on how economic conditions and data evolve, with several advocating for a gradual approach.
On Wednesday, San Francisco Fed President Mary Daly said there is no sense of urgency to lower interest rates, emphasizing officials could “carefully calibrate” policy.
“We do not need to be urgent,” Daly said in an interview on PBS NewsHour. “There’s no sense of urgency, but we do need to continue to carefully calibrate our policy and make sure it’s in line with the economy we have today and the one we expect to have going forward.”
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