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Relationship with Trump
Willingness to Interact: Powell expressed his desire to maintain a good relationship with the Trump-led White House and the newly appointed Treasury Secretary. This shows that Powell values communication and cooperation with government departments while maintaining policy independence. Potential Disputes: Although Trump currently does not plan to fire Powell before his term ends, if the Federal Reserve decides to raise interest rates, this could become a trigger for renewed disputes between the two. Raising interest rates could have a tightening effect on the economy, contrary to the economic stimulus policies that Trump may desire.
Inflation and Interest Rates
Inflation Forecast Raised: Powell stated in December that the Federal Reserve has raised its inflation expectations, forecasting an inflation rate of 2.5% by the end of 2025, up from the previous 2.2%. This change reflects the Federal Reserve's concerns about inflationary pressures. Reduction in Rate Cuts: Due to the upward adjustment of inflation expectations, the Federal Reserve plans to reduce the number of rate cuts from 4 to 2 next year. This indicates that the Federal Reserve may be more cautious in addressing inflation, leaning towards maintaining or raising interest rates. Policy Impact: Powell also mentioned that some of Trump's policies (such as tariffs) could impact interest rates, but the Federal Reserve is currently unclear about this. This shows that policymakers need to consider various factors when assessing economic and policy impacts.
Changes in Federal Reserve Voting Members
New Members Joining: By 2025, the Federal Reserve will have new voting members joining, including the presidents of the Boston, St. Louis, Kansas City, and Chicago Federal Reserves. The addition of these new members will bring new perspectives and opinions. Hawks and Doves: Among these new members, only Goolsbee from Chicago is a 'dove' who leans towards not raising interest rates. In contrast, several others, such as Collins from Boston and Mester from St. Louis, lean towards raising rates as 'hawks', with Schmid from Kansas City being a more radical 'hawk'. This could lead to more divisions and controversies within the Federal Reserve when deciding whether to raise interest rates.
In summary, Powell's latest news involves his relationship with Trump, inflation and interest rate expectations, and changes in the Federal Reserve's voting members. This information is crucial for understanding the future direction of the Federal Reserve's policies and their impact on the economy and markets. I hope this explanation helps you better understand Powell's latest developments!
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