According to Jinshi Data, Trump's promise to reform tax, trade, immigration and regulatory policies may stimulate consumer demand, restrict labor supply, lead to rising inflation and lower unemployment. Powell needs to judge its impact.
Powell needs to guide policymakers in discussing when to stop cutting interest rates to avoid a rebound in inflation or a recession in the job market. The Fed is shrinking its balance sheet, and Powell may want to extend the time of the reduction to avoid a repeat of the cash shortage in 2019.
The 2025 review will determine whether to revise the monetary policy framework to avoid excessive focus on employment or inflation. The Fed needs to resolve conflicts with the government over bank supervision, and the Trump administration may try to reform the way banks are supervised.
