‘The Big Money Show’ discusses Jerome Powell’s uncertain future, the Fed’s rate decision, and the appointment of Kevin Warsh as an opportunity for leadership change.
I The Federal Reserve On Wednesday he announced that he would leave interest rates unchanged amid concerns about rising inflation amid the Iran war.
Fed policymakers voted to leave the benchmark federal funds rate unchanged at the current range of 3.5% to 3.75%. The move follows the central bank’s decision to hold rates unchanged in January and March after three consecutive 25 basis point cuts in September, October and December to close last year.
The Federal Open Market Committee (FOMC), the central bank’s panel responsible for monetary policy moves, voted 11-1 to leave interest rates unchanged. Fed Governor Stephen Miran opposed the 25 basis point cut.
Three other members of the FOMC – Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan – argued as they opposed the inclusion of language showing a bias toward lowering interest rates. The total of four abstentions was the highest number for an FOMC meeting since 1992.
The FOMC meeting is expected to be the last under the leadership of the Federal Reserve Chairman Jerome Powellas his term as chairman of the Fed will end on May 15. Powell said in his press conference that he intends to continue serving his term as a member of the Board of Governors of the Fed for a period to be determined due to his concerns about the Trump administration’s investigation into the Fed.
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Federal Reserve Chairman Jerome Powell’s term as a member of the Fed’s Board of Governors continues until January 31, 2028, although his chairmanship officially ends next month. (Li Yuanqing/Xinhua via Getty Images)
The FOMC statement noted that the war in the Middle East “contributes to a high level of uncertainty about the economic outlook,” and that the economy is growing at a low rate of job gains and inflation has been boosted by recent increases in global energy prices.
Powell opened his press conference by saying that policymakers are “very focused on achieving our twin mandatory goals of high employment and stable prices for the benefit of the American people.”
He noted that the decline in job growth is due to “a slowdown in labor force growth due to a decline in immigration and labor force participation,” and said that inflation has recently risen due in part to “a significant increase in global oil prices caused by the conflict in the Middle East.”
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Powell was asked about the impact of ongoing oil price shocks and said that “in the textbook, you’ll look at oil shocks because they tend to be short-lived and often reversible, and monetary policy works with long and variable lags, so you know, you wouldn’t react quickly.”
“That is even more true given that we have several years above 2% inflation and we are already looking at the tariff shock, so I think we will be very careful about that. But the question about looking at the power is not really in front of us at the moment, it has not come even now, and I think we will want to see the back side of that and the progress in terms of reducing prices,” he said, explaining even to reduce prices.
President Donald Trump nominated Powell to chair the Fed in 2017, but he has repeatedly criticized and threatened to fire him over the years. (Andrew Caballero-Reynolds/AFP/Getty Images)
FOX Business’ Edward Lawrence noted four arguments in the FOMC statement and asked Powell if he would give a different Fed to his successor.
“The thing we have to remember is, we’ve always had strong debates and they’re very good debates, I have to say, they’ve been really good. And we’re in an extraordinarily difficult situation, we’ve had four shocks – actually you could say more than four, but at least, we’ve had the pandemic, we’ve had the invasion of Ukraine, we’ve had tariffs, and now Powell we’ve got Iran.
“Every supply shock has the potential to increase inflation and unemployment, and the central bank has a really hard time knowing what to do. So the right thing to do is to try to balance the realization of those two goals, and that’s what our framework requires us to do,” he said. “It’s natural for you to have different opinions on the committee… if everybody agrees, that would be surprising, and I think it’s partly a function of the most difficult set of shocks that we’ve had in the last five or six years.”
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What’s next for Jerome Powell?
Powell said this would be his last press conference as chairman and congratulated his successor, former Fed Governor Kevin Warsh, on his nomination from the Senate Banking Committee earlier Wednesday.
He said he plans to continue serving as a member of the Fed’s Board of Governors after his term as chairman ends due to lingering concerns about the Trump administration’s legal actions against the Fed.
“I accepted last Friday’s announcement made by the US Attorney for the District of Columbia that he has closed the criminal investigation. He also noted that he will not hesitate to reopen the investigation. Over the weekend, the Department of Justice gave assurances that they will not reopen the investigation unless there is a criminal referral from the inspector general of the Fed. And if, as part of the decision, they will not reopen the investigation. investigation, or send new subpoenas,” said Powell.
Powell’s term as chairman began in 2018 after he was nominated by President Donald Trump the previous year. (Saul Loeb/AFP via Getty Images)
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He said they are encouraged by what happened recently and his decisions on these issues “will continue to be guided by what I believe is in the best interests of the institution and the people we serve.”
“My concernis about a series of illegal attacks on the Fed that threaten our ability to conduct monetary policy without considering political factors. And I want to note here, this has nothing to do with verbal criticism by elected officials. I have never suggested that such verbal criticism is a problem, and neither is anyone else here,” explained Powell.
“But these legal actions by the administration have never existed in our history of 113 years and there are constant threats of more such actions. So I worry that this attack is hurting the institution and putting at risk something that is very important to society – which is the ability to conduct monetary policy without considering political factors,” he added.
“It’s very important for the economy, for the people we serve, that they can rely, in the long run, on a central bank that works that way without political influence. It’s part of the whole foundation of this amazing economy that we have, it’s one of the many reasons why the US economy is the envy of the world,” said Powell.
Powell said he plans to keep a low profile as Fed governor and won’t be a “shadow chair” once Warsh is confirmed and sworn in. (Amanda Andrade-Rhoades/Reuters)
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The outgoing Fed chairman added that he had previously planned to retire at the end of his tenure as chairman, but that he was waiting for “the investigation to be well and truly finished with transparency, and I’m waiting for that, and I’ll leave when I think it’s appropriate to do so.”
Powell said he plans to “keep a low profile as governor. There is only one chairman of the Federal Reserve Board, when Kevin Warsh is confirmed and sworn in, he will be in that chair when he is sworn in … his new colleagues will elect him to chair the FOMC again.”
What do the experts say about interest rates
Ellen Zentner, chief economist at Morgan Stanley Wealth Management, said “Jerome Powell sounded cautious after his last FOMC meeting as Fed chairman. The current backdrop of strong economic growth, sticky inflation, and a stable labor market does not justify low rates.”
“Unless that picture changes, ‘wait-and-see’ will remain the Fed’s modus operandi. Although Kevin Warsh has not indicated that he will push to reduce the aggressiveness, any policy change will require consensus from the FOMC, and today highlighted the range of opinions on the committee, which will soon include Jerome Powell who heads the FAP. to change the calculus of the central bank, or its process,” said Zentner.
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Kay Haigh, global head of income and liquidity solutions at Goldman Sachs Asset Management, said the Fed’s latest guidance “shows it’s on a more stable footing when it comes to policy guidance, even though some members want bipartisan language.”
“Although the risks facing inflation have increased, the Fed is keeping one eye on potential weakness in growth and the labor market. This balance could see rates brought back down to neutral later this year; However, the FOMC will be sensitive to the re-escalation in Iran and the rise in energy prices, and could keep policy limits in that situation,” explained Haigh.
