[Q&A] Trump's Pressure for Rate Cut, Powell Says "Fed Will Do Its Job" [Fed Watch]

Press Conference Right After the FOMC on the 29th (Local Time)

In Response to Trump's Pressure for Rate Cut

"Focus on Achieving Fed's Goals"

Interpreted as a Hint at Central Bank Independence

Photo = Fed Homepage

"Focus on Achieving Fed's Goals"

"Do not expect the Fed to do anything other than its job (under political influence)."

Jerome Powell, Chairman of the Federal Reserve, reiterated the Fed's independence during a press conference held right after the January Federal Open Market Committee (FOMC) on the 29th (local time).

Since the market had already been certain of the Fed's rate freeze, the focus of the day was not on monetary policy but on how Chairman Powell would respond to U.S. President Donald Trump's pressure for a rate cut. Chairman Powell drew a line by stating that he would not directly comment on the President's duties, but indirectly hinted at the Fed's independence by saying, "We will focus on what the Fed needs to do."

▶ U.S. President Donald Trump said at the World Economic Forum (WEF) in Davos, Switzerland, that he would immediately demand a rate cut. How could this affect (monetary) policy?

"I will not react or comment on what the President said. The public should focus on the Fed using its (policy) tools to achieve its goals, as we have always done, and working. The public should believe that the Fed will provide the best service."

▶ Do you evaluate the current base rate as restrictive?

"My assessment (of the rate level) has changed. Looking back over the past year, we can see that monetary policy is restrictive. Inflation has come down to around 2%, and employment remains at its maximum. Monetary policy is significantly less restrictive than before. We need to consider policy adjustments before the labor market turns weak."

▶ Across the FOMC, how do you view concerns about the risk of rising inflation, especially related to (tariff) policies associated with the Trump administration?

"In the short term, (inflation) expectations seem to rise slightly, but not in the long term. We do not know what will happen with tariffs, immigration, fiscal policies, etc. (Policy realization) has just begun. I think we need to allow these policies to be clearly expressed before we can reasonably assess their impact on the economy. So we will watch carefully. And as we always say, this is no different from other policy changes at the start of an administration. We will try to watch patiently and understand. And as you know, we will not rush until we understand what our policy response will bring."

▶ You once said in 2021, "An organization with a strong and sustained commitment to diversity and inclusion, both in the public and private sectors, is the most successful." Do you still think so? How do you view the Trump administration's executive order banning efforts to secure diversity and inclusion?

"To the first question, I would answer 'yes.' But to the second question, I would say this: We are no different from others. We are reviewing as details related to the order are provided. As we have done in several administrations, we strive to ensure that policies comply with executive orders and align with relevant laws. And I will not provide more specifics on all these issues today."

▶ Can you assure the American people that the Fed will operate independently of politics?

"As I have said countless times over the past few years, this is what we do. We study the data, analyze how it affects the outlook and balance of risks, and use our tools to try to achieve our goals based on our best understanding and best thinking. That's what we do. Do not expect us to do anything else. And many studies have shown that the way the central bank operates is the best way to achieve these goals for the benefit of the American people."

▶ Has the Fed started modeling how policy changes, such as immigration policy, will affect the workforce and inflation?

"Our staff is currently modeling. However, you should know that it is difficult to predict how wide the range of possibilities is for what might happen in the economy. As you know, no one expected a pandemic, and everything changed. The Fed does not act until it sees much more."

▶ President Trump said he would lower inflation by reducing gas and energy costs. Are these costs the cause of inflation? And can lowering these costs have a dramatic effect?

"I will not react or discuss what an elected politician says."

New York = Correspondent Shin-Young Park nyusos@hankyung.com