Federal Reserve Chairman Jerome Powell downplayed the prospect of tensions with the incoming Trump administration, stating that he expects officials to act cautiously as they continue to lower interest rates.
Powell remarked on the interest rate level that neither stimulates nor suppresses the economy, saying, 'As we try to find the neutral rate, we can be a bit more cautious.'
In October, the Federal Reserve's preferred core inflation measure accelerated year-on-year, supporting a cautious further rate cut. Meanwhile, Powell noted that the downside risks to the labor market appear to have receded.
The policymakers' next meeting will be held in Washington from December 17 to 18. Powell did not disclose whether he supports lowering interest rates at this meeting. However, after his remarks, several analysts indicated they expect the Federal Reserve to cut rates by 25 basis points this month and then hold steady at the January meeting.
When asked about President-elect Trump and Treasury nominee Scott Bessent, Powell expressed confidence that he could work well with the incoming administration.
Powell said Wednesday at the New York Times DealBook Summit in New York, 'I fully expect that we will maintain the same general relationship and institutional relationship, such as with the Council of Economic Advisers, but importantly with the Treasury.'
Regarding Bessent, Powell said, 'I believe once his nomination is confirmed, I will have the same relationship with him as I do with other Treasury Secretaries.'
Bessent had previously suggested appointing a 'shadow Federal Reserve chairman' before Powell's term ends in 2026, which would effectively diminish Powell's influence over financial markets.
Powell stated that he does not believe the incoming administration would propose this idea: 'I think that is simply not on the table.'
Bitcoin is a competitor to gold, not to the dollar.
While cryptocurrency enthusiasts like to view Bitcoin as a potential substitute for the dollar, Powell does not share that view.
He stated that Bitcoin is a speculative asset like gold, not something that can compete with currency.
Powell said, 'It's like gold, except virtual. People are not using it as a means of payment or a store of value. Its volatility is significant. It is not a competitor to the dollar but a competitor to gold.'
When asked whether Powell would own cryptocurrency, the Federal Reserve Chairman simply said, 'Not allowed.'
Economic Outlook
Powell also stated that the economy is 'in very good shape' and added that economic growth is stronger than previously thought. He said, 'I feel very good about the current state of the economy and monetary policy.' Powell added that the inflation rate has not yet fully recovered to the 2% target, but he believes the robust economic conditions have no reason not to continue.
Derek Tang, an economist at LH Meyer/Monetary Policy Analytics, wrote in a note to clients that a rate cut in December remains possible. He said, 'After that, we expect the fund rate to be lowered by 25 basis points per quarter until it reaches neutral levels.'
Priya Misra, a portfolio manager at JPMorgan Asset Management, said officials still need to weigh new inflation and employment data to be released between now and the December meeting, but Powell 'has not ruled out a rate cut.'
Misra said, 'He is trying to keep a lot of options open for a rate cut in December. He is creating conditions to slow the pace of rate cuts next year.'
Several policymakers indicated that the Federal Reserve should continue to lower rates at current levels, believing that the current interest rate level has a dampening effect on the economy, given cooling inflation. However, officials said that the speed and timing of rate cuts will depend on economic conditions and data changes, with some officials advocating for a gradual approach.
According to a Bloomberg survey of economists, Friday's non-farm payroll report is expected to show a rebound in hiring in November, with the unemployment rate remaining stable.
Article reposted from: Jinshi Data
