WASHINGTON (AP) — Federal Reserve Chairman Jerome Powell says political attacks by President Donald Trump played no role in the Fed’s decision in January to signal that it planned to take a pause in hiking interest rates. He also said in an interview broadcast Sunday that he can’t be fired by the president and that he intends to serve out his full four-year term.
In a wide-ranging interview with CBS’s “60 Minutes,” Powell said that the Fed decided to pause its rate hikes in January, after increasing rates four times in 2018, because the global economy was slowing and other risks to the U.S. economy were rising. The Fed said it planned to be “patient” in deciding when to change rates again.
Asked to define patient, Powell said, “Patient means that we don’t feel in any hurry to change our interest rate policy.”
At another point, Powell said the Fed felt its interest rate policy “is in a very good place right now” with the benchmark rate in a range of 2.25 percent to 2.5 percent, which Powell said was “roughly neutral,” meaning the Fed’s policy rate was not stimulating growth or holding it back.
“We think that’s an appropriate place for an economy that has the lowest unemployment in 50 years, that has inflation right about at our 2 percent objective, that has returned significantly to good health,” Powell said.
Powell said in the last three months, the Fed has seen increasing evidence of a global growth slowdown with slower activity in China and Europe and potential threats from such events as Brexit, Britain’s planned exit from the European Union.
“We’ve said that we’re going to wait and see how those conditions evolve before we make any changes to our interest rate policy and that means patient,” Powell said in the interview with Scott Pelley.
Powell said that despite outside criticism, the Fed will always “make decisions based on what we think is right for the American people. … We will never, ever take political considerations into effect.”
Asked if Trump could fire him, Powell said: “The law is clear that I have a four-year term. And I fully intend to serve it.”
Powell’s appearance on “60 Minutes” continued a tradition begun by then-Fed Chairman Ben Bernanke, who appeared on the program in March 2009, breaking a long tradition of Fed leaders not giving television interviews.
Bernanke’s appearance came during the depths of the Great Recession when the country was losing millions of jobs and the country struggled to get out of the deepest downturn since the 1930s.
Bernanke and Powell’s immediate predecessor, Janet Yellen, both appeared with Powell during the Sunday broadcast. Powell was picked for the top Fed job by Trump after the president decided not to offer a second term to Yellen. Both Bernanke and Yellen were asked what advice they had given Powell on withstanding outside criticism.
Bernanke said he kept a quotation from Abraham Lincoln on his desk saying that if your decisions turn out to be correct, the criticism will not matter. Yellen said that she and Powell had worked together closely on the Fed and that Powell was doing a good job of being “inclusive” in his decision-making.
Trump has been highly critical of the Fed’s rate hikes, calling the increases his biggest threat. Trump’s attacks were frequent last fall when the stock market was plunging in value, a drop that the president blamed in part on the Fed’s rate hikes.
Trump has not been as vocal about the Fed since the Fed announced it would be “patient” about future rate hikes, but in a March 2 speech he referred to Powell, without using his name, as a “gentleman” who likes raising rates and who likes tightening credit.
In his 2009 appearance, Bernanke talked about “green shoots” and said he felt the recession would “probably” be over by the end of 2009 if the efforts by the Fed and other government agencies were successful in stabilizing the banking system following the 2008 financial crisis.
The country did emerge from the recession in mid-June of 2009 and is currently in the tenth year of an expansion that will become the longest in U.S. history if it lasts past this June.
In the Sunday broadcast, Powell said while he felt U.S. growth would slow this year, he did not feel the country was headed for a recession.
“The outlook for our economy, in my view, is a favorable one,” Powell said. “This year, I expect growth will continue to be positive and continue to be at a healthy rate.”
The Fed in January signaled that due to a slowing global economy and other economic risks, it had decided to be “patient” in deciding when to raise interest rates again.
Powell also delivered that message last month in testimony before Congress.
While the Fed in December had signaled it expected to raise rates two more times in 2019, many economists believe the central bank will now keep rates unchanged for a prolonged period and may not hike rates at all this year.
The economy grew at a solid 2.9 percent rate in 2018, helped by Trump’s tax cuts and billions of dollars of increased government spending. But economists believe that support will wane this year and with the global economy slowing, the U.S. economy is likely to slow to growth of just above 2 percent.
On other topics, Powell:
__Said he did not see much evidence that financial markets had gotten “irrationally exuberant” but he did say that there were some areas that were “hotter than others” such as leveraged lending being extended to corporations.
__Said that while the economy might achieve annual growth of 4 percent in some years it would be difficult to have an extended period with growth that high because growth in the labor market and productivity, the two factors that determine overall growth, had both slowed.
__Described the federal government’s growing debt burden as an “unsustainable path but said at the moment the country was “not on the verge of a debt crisis or anything like that.” He said the government will ultimately find a way to deal with the debt problem.
Even if this is true, the fact that he has to say this has already compromised the independence of the Fed.
People are gonna make trading/lending decisions based not on the strength of the dollar or the US economy, but based on the political environment.
Considering the volatile nature of the political environment (and this isn’t unique to the US…this is the nature of things in a Democracy), lending is gonna have a fairly significant political uncertainty priced into the rates, which is gonna lead to billions, if not hundreds of billions, of lost productivity over the next decade or so.
Of course, this isn’t something that could be easily linked to Trump, so he, unlike every President before, doesn’t care. The lowering of the interest rates boosts his reelection chances, and that’s all he cares for.
For a more honest assessment of the economy and what it would take to spur higher growth, I found this article pretty spot on:
Jerome Powell is Preshitident Skanky-Manslut and the Trump Organization’s minion. He got his job so that Cuck Kushner and the Preshitident’s friends could get cheap loans. His predecessor was far more capable and competent. Jerry is another conservative incompetent. Conservative economics have always created debt, deficits, recessions and inequality. It does not work.
There are many ways to look at this but it all amounts to Trump making headlines and drawing attention to himself as always which made the Feds words about changing policy into a humiliation for it. It was humiliating enough that the financial markets were starting to teeter simply because of what used to be a perfectly common 20% drop in the stock index averages but then to have Trump rub their faces in it made it far worse for the already tattered remains of Fed credibility.
In Trump’s defense 99% of the people in the world think central banks should be ‘easy’ at all times. Don’t kid yourself thinking the Fed or any central bank is independent of politics Maybe on some short terms they can be a bit but long term they are now the direct decendants of the first central banker, John Law.
Central banks will start ‘printing’ again probably this year and for years and years to come.
Like the proverbial frog boiling in water, central bank QE which monetizes significant parts of their government long term debts is a revolution in central banking Reversing the foundational rule of modern central banking. That being not to monetize significant portions of government debt. The Rubicon has been crossed. This is not necessarily a bad thing. History marches on. Still it is a significant change that should be noted.
The most important aspect of this in the political sphere is that central bank ‘printing’, by the necessity of the mechanisms by which it is done injects trillions of dollars directly into the financial markets which has inflated them. This is a good way to understand the huge wealth disparity in the world now. The ‘value’ of financial assets has far outstripped the growth of the GDP economy. Of course that disparity has given the top stupendous political power and they are using that to accumulate more wealth and more power in a vicious circle. They will not give that up on their own.
WIth the US deficit approaching 7% of GDP, which is accomplished via banks and financial institutions, the agents of the wealthy, lending the money when the financial system teeters a bit as it did at year end, they will demand the Fed ‘print’ again. And so it will. If they would not then the banks and financial institutions would refuse to fund the deficit at low low low interest rates and blow the entire system up. They would rather destroy the system than to lose one bit of wealth and power.