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Relationship with Trump
Willingness to Collaborate: Powell expressed his desire to maintain a good relationship with the White House led by Trump and the newly nominated Treasury Secretary. This shows that Powell, while maintaining policy independence, also values communication and cooperation with government departments. Potential Disputes: Although Trump currently does not plan to fire Powell before the end of his term, if the Federal Reserve decides to raise interest rates, it could spark renewed tensions between them. This is because raising interest rates could tighten the economy, contrary to the economic stimulus policies that Trump may prefer.
Inflation and Interest Rates
Upward Revision of Inflation Forecast: Powell stated in December that the Federal Reserve's expectations for inflation have been revised upward, with an anticipated inflation rate of 2.5% by the end of 2025, higher than the previous 2.2%. This change reflects the Federal Reserve's concerns about inflationary pressures. Reduction in Rate Cuts: Due to the upward revision 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 dealing with inflation and is inclined to maintain or raise interest rates. Policy Impact: Powell also mentioned that some of Trump's policies (such as tariffs) may 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, including the presidents of the Federal Reserves of Boston, St. Louis, Kansas City, and Chicago. The addition of these new members will bring new perspectives and opinions. Hawks vs. Doves: Among these new members, only Chicago's Goolsbee is leaning towards being a 'dove' who prefers no rate hikes. In contrast, several others, such as Collins from Boston and Mester from St. Louis, lean towards being 'hawks' who favor rate hikes, with Schmid from Kansas City being an even more radical 'hawk'. This may lead to greater divergence and controversy 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 voting members. This information is crucial for understanding the future policy direction of the Federal Reserve and its impact on the economy and markets. I hope this explanation helps you better understand Powell's latest developments!
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