Throughout much of 2024, tensions between Trump and Powell were visible. While on the campaign trail, Trump frequently criticized Powell, expressing his desire for input and asserting that Powell had made numerous mistakes. “I feel the president should have a say in there, yeah, I feel that strongly,” Trump stated during a news conference in August. However, Bessent refuted this notion on Thursday, citing a report from The Wall Street Journal that claimed the president-elect did not believe he should influence Fed policymaking by being present in the room.
Nevertheless, Bessent mentioned that Trump would continue to express his opinions. In a press conference on January 7, Trump reiterated that “inflation is still rampant, and interest rates are excessively high.” In contrast, Powell and his colleagues forecasted in December that inflation would end 2025 at 2.5% rather than the previously estimated 2.2%, leading the central bank to reduce its anticipated rate cuts for the year from four to two.
If Trump’s proposed policies, such as tariffs and tax cuts, contribute to further inflation, the Fed might need to refrain even more from easing or contemplate rate hikes. This scenario would likely displease Trump, who had frequently criticized Powell during his first term for not lowering rates significantly, even suggesting negative interest rates at one point.
Trump openly discussed the possibility of firing Powell, asserting his authority to remove him and even demote him from his role as chair during a news conference in 2020. Powell acknowledged their public disagreements, confirming that Trump’s statements in private mirrored those made publicly.
Powell, however, expressed confidence that the central bank’s independence would not be compromised under a new Trump administration, emphasizing that the Fed’s purpose is to make decisions benefiting Americans regardless of political affiliations. Both Powell and Bessent have indicated their commitment to Powell serving his full term until 2026, while Powell’s tenure as chair ends sooner. Powell expressed optimism about maintaining positive relationships with the incoming Trump administration and the Treasury Department.
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