Trump challenges will define Powell's drama-filled final months as Fed chair
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Federal Reserve chair Jerome Powell. Illustration: Aïda Amer/Axios
Federal Reserve chair Jerome Powell may want to spend his last few months atop the world's most important central bank focused on trying to hand off a strong economy to his successor.
- Reality check: The universe has other plans.
Why it matters: The monetary policy outlook appears drama-free. Barring any shocks, interest rates are likely to remain on hold for the time being as the economy and job market stay steady.
- But there's no escaping the reality that over his final 16 or so weeks as Fed chair, Powell will be grappling with the fallout from two unprecedented events — each involving President Trump.
What he's (not) saying: At a Wednesday news conference, Powell refused to comment further on the Department of Justice investigation into his conduct related to the Fed's building renovations, despite several attempts by the Fed press corps to get him to say more.
- Powell let his uncharacteristically blunt assessment of the situation earlier this month stand for itself: In a video message, he called the investigation a "consequence" of the Fed's refusal to bow to Trump's pressure.
- "I'm simply going to refer you to the statement that I made on Jan. 11," Powell said Wednesday. "I'm not going to expand on it or repeat it," he said, adding that the press conference was "about the economy and what we did today."
Yes, but: Powell defended his presence at the Supreme Court last week for oral arguments in a case that will decide whether Trump can fire Fed governor Lisa Cook — and any other governor, for that matter.
- "That case is perhaps the most important legal case in the Fed's 113-year history," Powell said. "As I thought about it, I thought it might be hard to explain why I didn't attend."
- Treasury Secretary Scott Bessent told CNBC last week that it was a "mistake" for Powell to attend the arguments.
- While the case is unprecedented, Powell said that a Fed chair appearing at the nation's highest court is not: He recalled Paul Volcker attended a 1985 Supreme Court hearing.
The big picture: Powell did not give a substantial answer for the first 10 minutes of Wednesday's press conference, also ducking a question about the dollar, traditionally the purview of the Treasury Department. The first question he did answer — from Axios — was about future rate cuts.
- It was clear that Powell is in no rush to cut rates further: "The unemployment rate has been broadly stable, and inflation remains somewhat elevated. ... We'll be letting the data light the way for us," Powell said.
- Financial markets believe the final rate move of the Powell era happened in December, with the CME FedWatch tool showing rising odds of another rate cut in the summer months — when Powell's successor is set to take over.
What we're watching: Powell said that the decision to stand pat had "broad support" on the Fed's rate-setting committee.
- He said that was the case even among non-voting members, despite two dissents in favor of a cut from Trump appointees Christopher Waller and Stephen Miran.
- That suggests a high bar for the next Fed chair to win over the committee, which might still include Powell if he stays on as a governor (that possibility being another question he ducked Wednesday).
The bottom line: Trump's pressure to cut rates is escalating, even as the clock ticks down on Powell's time atop the central bank.
- "We should have a substantially lower rate now that even this moron admits inflation is no longer a problem or threat," Trump wrote Thursday on Truth Social.
- Powell did not characterize inflation that way.
We still don't know who the president will appoint to succeed Powell. We do know, however, what Powell would advise his successor to do — and not do.
- In response to a question from a reporter, Powell offered advice to the next Fed chair, who will no doubt take the helm with contentious demands to cut rates to rock-bottom levels.
What he's saying: Powell's advice was threefold.
- "Don't get pulled into elected politics. Don't do it." As Powell has witnessed over the last few weeks, that might be easier said than done.
- Spend time on Capitol Hill. "If you want democratic legitimacy, you earn it by your interactions with our elected overseers ... it's something you need to work hard at, and I have worked hard at it," Powell said, referring to Congress, which has oversight of the Fed.
- "Whoever [the next Fed chair] is, you're about to meet the most qualified group of people you not only have ever worked with, you will ever work with when you meet Fed staff," Powell said.
The intrigue: Powell's emphasis on the professionalism of his Fed colleagues went beyond mere politesse. It struck us as a heartfelt endorsement of the thousands of public servants in the Fed system — who some Trump allies have maligned.
