Jerome Powell, the Chairman of the Federal Reserve, stated in Dallas that there's no urgency to lower interest rates, despite inflation remaining above the Fed's 2% target.
Inflation and the Fed's Approach
Jerome Powell stated at the Dallas Fed event on November 14 that the economy isn't signaling urgent action. However, inflation remains above the Fed's target, and rent costs are not decreasing. Powell acknowledged the economy's strength with a 4.1% unemployment rate and 2.5% annual growth, but inflation threatens these achievements. He described the current situation as 'remarkably good,' yet constraints persist. Shelter costs accounted for much of October's CPI increase. Powell claims to have room to proceed cautiously, relying on the economy's strength.
Brewing Conflict with Trump
After Donald Trump was announced president-elect, at the press conference following the Fed's meeting, Powell was asked if he'd step down if Trump requested it. His response was a firm 'No.' Powell confidently stated that no president can dismiss or demote a Fed chair. Trump has criticized Powell for not reducing rates quickly and expressed that the president should have a say in rate decisions. Such statements oppose the Fed's independence, but with Republicans possibly gaining power, Trump might increase pressure on the Fed.
Economic Growth and Hidden Issues
Both Powell and Trump emphasize economic growth but overlook underlying issues. Powell cites strong consumer spending and low unemployment. Behind these figures lie problems: Trump's 2017 tax cuts brought short-term benefits, while increasing deficits and national debt. The pandemic exacerbated these issues, and recovery measures were uneven. Powell's cautious approach doesn't relieve many struggling Americans.
The U.S. economic circumstances remain challenging, with Powell and Trump offering conflicting approaches to address financial issues. Each provides distinct economic policies, but neither offers complete confidence in their effectiveness.