During the election campaign, Trump promised to significantly increase customs duties on imports entering the United States, which economists warn will lead to inflation. Jay Powell does not hide his apprehension.
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The US Federal Reserve admits that the new administration led by Donald Trump, like any administration in the US, could take measures that have an impact on price developments and, in this way, lead the central bank to adjust monetary policy as a result of these measures. But Jay Powell who was harshly criticized by Trump during the election campaign, refuses to comment on possible measures, such as the promised increase in customs duties: “We don’t guess, we don’t speculate and we don’t make assumptions.“Jay Powell shot.
The answer was given by Jay Powell in the usual press conference to explain the monetary policy decisions taken this Thursday (another interest rate drop of only 25 basis pointsas expected by analysts). The central banker, who already knew that the journalists’ first question would be related to the results of Tuesday’s elections, in which Donald Trump returned to the White House, I had an answer ready and it was found that, contrary to usual, he used a cheat sheet to ensure that the answer was given effectively.
“In the short term, the elections will have no impact on our decisions,” Jay Powell began. However, “we do not know what the time and the substance of the policies that can be taken, so we also do not know what the impact of these policies could be on the economy, employment and financial stability.” “We don’t guess, we don’t speculate and we don’t make assumptions,” said Jay Powell, in a sound byte prepared.
Even so, Powell wanted to express a position of strength, without referring to Trump and avoiding making “direct or indirect comments on the elections.” “In principle, It is possible that the policies of any administration or Congress could produce effects that impact our decisions.in light of our commitment to price stability and economic growth,” said Jay Powell.
Trump 2.0 seems to have pleased the US markets. But what can we expect for the future?
During the campaign, Trump promised to significantly increase customs duties on imports entering the United States. Several economists have warned that this will create inflation, something that, in principle, the Federal Reserve would have to combat through tighter monetary policy, that is, higher interest rates. Without confirming this possibility, Powell left the implicit warning that the central bank, in the context of the independence it enjoys, will not stop reacting to possible measures launched by the next administration.
A few hours before the announcement of this decision, the North American financial press reported that Trump will ‘probably’ let Jay Powell finish his term (2026), and is not expected to be replaced immediately; Time will tell whether or not the tense relationship between the two allows the mandate to be carried to the end.
It was Donald Trump who appointed Jay Powell to the Federal Reserve during his administration (2016-2020) but, as a candidate for this Tuesday’s elections, the magnate was very critical of Powell’s decisions, accusing him of lowering interest rates . the Democrats, Joe Biden and the candidate to succeed him, Kamala Harris.
Source: Observadora
