What to expect from the Fed on Wednesday
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Illustration: Brendan Lynch/Axios
When Federal Reserve chair Jerome Powell takes questions from the news media at 2:30pm on Wednesday, the complexities of monetary policy may well turn out to be the easy part.
The big picture: The Fed's interest rate policy is in a wait-and-see mode for the moment. Meanwhile, the questions hanging over the institution are considerably more consequential.
- Will Powell continue his assertive pushback against a dubious criminal investigation by the Trump administration?
- Can the president fire a Fed governor without firmly establishing cause, as the Supreme Court is now weighing?
- Who will be Powell's successor when his term as chair expires in four months, and will that person act independently from the White House?
Between the lines: Powell, in his final, legacy-defining months as chair, is likely to face these questions, and must decide whether and how to address these sensitive topics.
- For example, on President Trump's attempted firing of governor Lisa Cook, Powell has thus far demurred on commenting on the case — but did show up for oral arguments in the case at the Supreme Court.
- He took a combative stance against the administration's criminal investigation, which he described as a pretext to pressure the Fed to cut rates.
The intrigue: Another open question is whether Powell will vacate his governor position, which he could occupy until 2028, while his term as chair is up in May of this year.
- His modern predecessors have stepped down entirely when their chairmanships ended.
- But Powell has declined to comment on his plans so far, implicitly threatening to prevent the president from stacking the Fed if Trump doesn't stick to appointees who respect the institution's vaunted independence.
State of play: By comparison, the official business on tap this week for the Federal Open Market Committee looks pretty straightforward. Since the policymakers last met seven weeks ago, data has pointed to steadiness in both the labor market and inflation trends.
- Growth has looked robust. The Atlanta Fed's GDPNow model currently points to 5.4% annualized growth in Q4.
- That all points to the Fed leaving its target interest rate range unchanged at 3.5% to 3.75%.
- "All eyes will be on Chair Powell for any signals about the Fed's openness to further easing, but for now, the central bank's cautious, meeting-by-meeting approach seems set to continue," Christian Hantel, head of global corporate bonds at Vontobel, said in a note.
Of note: With the new year comes a new mix of regional Fed bank presidents who have a vote on policy. Cycling into voting roles this year are Cleveland Fed president Beth Hammack and Dallas Fed president Lorie Logan, who have both taken a hawkish tone in opposition to recent rate cuts.
- Neel Kashkari (Minneapolis) and Anna Paulson (Philadelphia) round out the new voters, Paulson voting for the first time since starting the job last year.
