Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa Bay news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Charlotte news in your inbox

Catch up on the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Fed chair Jerome Powell speaking at a news conference earlier this month. Photo: Sha Hanting/China News Service/VCG via Getty Images

Federal Reserve chairman Jerome Powell laid out the importance of the Fed's political independence during a speech at the Council on Foreign Relations in New York on Tuesday, saying the central bank is "insulated from short-term political pressures." It was one of his most direct acknowledgements of President Trump's criticisms.

"Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests. Central banks in major democracies around the world have similar independence."
— Jerome Powell

Why it matters: Despite consistent criticism by Trump, who has exhorted the Fed to stop raising interest rates — and, lately, to cut them — Powell has largely deflected questions about the series of attacks from the White House. In his speech, Powell said the Fed was "grappling with" whether or not the economic uncertainty in recent weeks will "call for additional policy accommodations," i.e. a lowering of interest rates.

The backdrop: Powell's comments come days after the Fed's notable shift from keeping monetary policy on hold — that is, not raising interest rates — to suggesting it might approve a rate cut as soon as next month, citing the possibility of a more intense U.S.-China trade war as a factor stoking economic uncertainty.

  • Inflation has been below the Fed's 2% target, strengthening the case for a potential rate cut. Powell, who last month played down low inflation as "transitory," said Tuesday that the inflation undershoot "looks like it may be more persistent than we had hoped."
  • Powell also acknowledged the risk involved in cutting rates imminently, since such a move would leave the Fed with less flexibility in a severe economic downturn.
  • The same problem haunts other central banks around the world, including the Bank of Japan and the European Central Bank.

In the meantime, the U.S. stock market is trading near record highs on the prospects of a rate cut as soon as the Fed's next meeting in July.

  • "Sometimes financial markets can be quite prescient about evolving risks," Powell said. "Other times they can be excessively optimistic" and can "ignore risks."
  • Powell said the Fed has to use some "judgement" in looking at "financial market developments over time to decide what to react to."

What they're saying: "Until about six months ago, the Federal Reserve was confidently embarked on a path of monetary policy normalization," or moving interest rates back to pre-crisis levels, notes Mohamed El-Erian, chief economic adviser at Allianz. By contrast, the Fed has now turned its focus to "sustaining the economic expansion," which Powell has acknowledged several times in recent weeks.

Bottom line: Facing pressure from markets and Trump, it's unclear whether the Fed thinks that those two things can happen at the same time.

  • The Fed "may have normalized all it could for this cycle," Tracie McMillion, head of Global Asset Allocation at Wells Fargo Investment Institute, tells Axios. "If we get a significant amount of good news over the next few months, then the Fed may be able to resume its path to normalization."

Go deeper:

Go deeper

Updated 40 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Eniola Odetunde/Axios

  1. Health: Most vulnerable Americans aren't getting enough vaccine information — Fauci says Trump administration's lack of facts on COVID "very likely" cost lives.
  2. Education: Schools face an uphill battle to reopen during the pandemic.
  3. Politics: Biden unveils "wartime" COVID strategyBiden's COVID-19 bubble.
  4. Vaccine: Florida requiring proof of residency to get vaccine — CDC extends interval between vaccine doses for exceptional cases.
  5. World: Hong Kong puts tens of thousands on lockdown as cases surge — Pfizer to supply 40 million vaccine doses to lower-income countries.
  6. Sports: 2021 Tokyo Olympics hang in the balance.
  7. 🎧 Podcast: Carbon Health's CEO on unsticking the vaccine bottleneck.
Bryan Walsh, author of Future
4 hours ago - Health

Schools face an uphill battle to reopen during the pandemic

Illustration: Aïda Amer/Axios

President Biden's plan to accelerate the reopening of K-8 schools faces major challenges from a still out-of-control pandemic and more contagious coronavirus variants.

Why it matters: The longer American kids miss in-person schooling, the further they fall behind. But the uncertain state of the science on the role young children play in the pandemic continues to complicate efforts to reopen schools.

Focus group: Former Trump voters say he should never hold office again

Illustration: Sarah Grillo/Axios

"Relief" is the top emotion some swing voters who used to support Donald Trump say they felt as they watched President Biden's swearing-in, followed by "hope."

Why it matters: For voters on the bubble between parties, this moment is less about excitement for Biden or liberal politics than exhaustion and disgust with Trump and a craving for national healing. Most said Trump should be prohibited from ever holding office again.