Fed Chief Jerome Powell Says He Won't Resign If Trump Asks

Ebony Scott
January 7, 2019

Those back-to-back market-friendly developments helped USA and European stock bourses surge higher and set aside for now nervousness over trade wars, a United States government shutdown and a slowing economy that have pressured stocks for most of the last month.

"As always, there is no preset path for policy", Powell said, according to CNBC. "With the muted inflation readings we have seen coming in, we will be patient as we watch to see how the economy evolves". The Fed said in December it anticipated raising rates twice in 2019.

"It's hard to square recession worries with the strongest job growth we've seen in years", said Alec Young, managing director of global markets research for FTSE Russell.

Powell "said exactly what the markets wanted to hear", said Gregori Volokhine of Meeschaert Financial Services.

Stocks were already trading higher after the release of December labor data that showed job and wage growth were still solid despite the market's effort to convince investors otherwise. The Dow Jones industrial average was up around 700 points near the close. Sliding equity prices, weakness overseas and mixed economic data at home have prompted calls for the Fed to put rates on hold, but the USA labor market remains strong.

Trump has complained that the Fed has pushed rates higher despite the fact that there is no evidence that inflation was getting out of control.

Jerome Powell, chairman of the US Federal Reserve. Courts in cases that involved other agencies have interpreted that language to not cover policy differences. Fed watchers have said that the bar is very high for the president to remove Powell "for cause" as the law appears to require, provided Powell decides to fight the dismissal in court.

Federal Reserve Chairman Jerome Powell on Friday sought to ease market concerns that the US central bank was ignoring signs of an economic slowdown, saying he was aware of the risks and would be patient and flexible in policy decisions this year. "But what I do know is that we will be prepared to adjust policy quickly and flexibly and to use all of our tools to support the economy should that be appropriate to keep the expansion on track".

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Powell also addressed the issue that the central bank was overusing interest rate policy in an effort to prevent the economy from overheating.

Her comments, from a sometimes hawkish Fed official, highlighted the change in tone at a central bank that, after two years of roughly quarterly rate increases, was now assessing the risks of going too far.

Trade uncertainty and concerns about global growth seem to be an important factor in the recent USA weakness: tariff worries have surfaced repeatedly in Fed surveys.

The Fed had increased the size of its balance sheet four-fold to a record $4.5 trillion in an effort to push long-term interest rates lower.

The Fed's tightening cycle includes both rate hikes and the gradual shedding of its more than $4 trillion in assets. Some analysts said investors were acting as if a recession was on the horizon, despite a lack of evidence that the US economy is struggling.

"The problem in my opinion is Treasury and the Fed", Trump said.

Asked if there were any plans to meet with Trump, he declined to give a specific answer, simply saying "I would say that meetings between presidents and Fed chairs do happen". Powell responded with a terse "No" when asked if he would resign if Trump requested him to do so.

Other reports by GizPress

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