Jun 25, 2019

Fed chairman talks up importance of apolitical Fed

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."

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Trump touts press briefing "ratings" as U.S. coronavirus case surge

Photo: Drew Angerer/Getty Images.

President Trump sent about a half-dozen tweets on Sunday touting the high television ratings that his coronavirus press briefings have received, selectively citing a New York Times article that compared them to "The Bachelor" and "Monday Night Football."

Why it matters: The president has been holding daily press briefings in the weeks since the coronavirus pandemic was declared, but news outlets have struggled with how to cover them live — as Trump has repeatedly been found to spread misinformation and contradict public health officials.

World coronavirus updates: Total cases surge to over 700,000

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

There are now than more than 700,000 confirmed cases of the coronavirus around the world, according to data from Johns Hopkins. The virus has now killed more than 32,000 people — with Italy alone reporting over 10,000 deaths.

The big picture: Governments around the world have stepped up public health and economic measures to stop the spread of the virus and soften the financial impact. In the U.S., now the site of the largest outbreak in the world, President Trump said Saturday he would issue a "strong" travel advisory for New York, New Jersey and parts of Connecticut.

Go deeperArrowUpdated 29 mins ago - Health

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 2 p.m. ET: 704,095 — Total deaths: 33,509 — Total recoveries: 148,824.
  2. U.S.: Leads the world in cases. Total confirmed cases as of 2 p.m. ET: 132,637 — Total deaths: 2,351 — Total recoveries: 2,612.
  3. Federal government latest: The first federal prisoner to die from coronavirus was reported from a correctional facility in Louisiana on Sunday.
  4. Public health updates: Fauci says 100,000 to 200,000 Americans could die from virus.
  5. State updates: Louisiana governor says state is on track to exceed ventilator capacity by end of this week — Cuomo says Trump's mandatory quarantine comments "really panicked" people
  6. World updates: Italy on Sunday reported 756 new deaths, bringing its total 10,779. Spain reported almost 840 dead, another new daily record that bring its total to over 6,500.
  7. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

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