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Jerome Powell speech today: Fed chair explains why interest rates are unchanged despite Trump criticism
The Federal Reserve on Wednesday announced that it is leaving its key rate unchanged, at about 3.6%, after lowering it three times last year.
The Federal Reserve on Wednesday announced that it is leaving its key rate unchanged, at about 3.6%, after lowering it three times last year. Explaining the decision, Fed Chair Jerome Powell and the central bank said that there are signs the job market has stabilized, growth was “solid,” in a clear upgrade from last month’s characterization as “modest.”
The Fed voted 10-2 to keep rates in the 3.5% to 3.75% range.
The Fed's decision comes as Trump has repeatedly criticized Powell for months for not sharply cutting the short-term rate. When the key rate is lowered, it tends to lower borrowing costs for things like mortgages, car loans, and business borrowing, though those rates are also influenced by market forces.
‘We’ll learn who Jerome Powell's successor is'
“I’d characterize today’s meeting as a very boring meeting during very interesting times,” Christian Hoffman, head of fixed income at Thornburg Investment Management, said.
“Any day now, I expect we’ll learn who Powell’s successor will be, and I wouldn’t be surprised if an announcement is timed to the current meeting … Trump, paradoxically, wants a new chair who is sympathetic to his views and also credible to investors.”
BlackRock exec Rick Rieder and former Fed Governor Kevin Warsh are expected to be the frontrunners to replace Powell.
Stocks at record high
Ahead of the Fed's announcement, global stocks recorded an intraday high for a third straight session, while the US dollar showed signs of stabilizing after a sharp drop in the prior session.
The Dow Jones Industrial Average rose 3.45 points, or 0.01%, to 49,006.97, the S&P 500 rose 16.20 points, or 0.23%, to 6,994.80, and the Nasdaq Composite rose 124.60 points, or 0.53%, to 23,943.34 earlier in the day.
More cuts expected this year
Meanwhile, Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, said that the Feb may be on hold for a while.
“The Fed is likely on an extended pause with strong activity data and signs of stabilization in the labor market suggesting little need to take out further insurance,” he said, as per CNBC. “However, we expect easing to resume later in the year as a moderation in inflation allows for two further ‘normalization’ cuts to take rates back to levels seen by the median FOMC member as neutral.”
(With AP inputs)
