The Federal Reserve (Fed), the American central bank announced a further interest rate cut by 25 basis pointsequal to 0.25%. This is the fourth consecutive reduction in the cost of money, which however does not further move the American stock market, fresh from the increases following the election of Donald Trump.
The future president of the United States was one of the central themes of the Fed president’s press conference, Jerome Powellwho clearly ruled out the possibility of resigning before the end of his mandate in the event of a request from the new administration. Powell’s term will end in 2026 and there are already several candidates to succeed him among the ranks of Trump officials.
The Federal Reserve cuts rates
A few days after Donald Trump’s victory in the presidential elections in the United States, the Federal Reserve cut interest rates by 25 basis points. The cost of money in the USA will therefore be between 4.75% and 5%, much higher than the European one, also given the very rapid growth of the American economy in the last two years and an inflation that still remains above the 2% target.
The rate cut was widely expected by the financial markets, which do not appear to have reacted in any particular way. The Dow Jones remained practically unchanged, falling by just over a thousandth of a point, while the Nasdaq grew by 1.51%. The American stock market had already returned from two days of increases, following Donald Trump’s electoral victory.
“We are not on a predefined path. We decide meeting by meeting,” underlined Fed President Jerome Powell in the press conference announcing the cut, underlining how the path to reducing rates still depends on a progressive reduction in the inflation rate. In September the figure reached 2.4%very close to the 2% target that most economists consider optimal for a growing country.
Clash between the Fed president and Trump
Journalists’ questions a Powell have inevitably revolved around the election of Donald Trump as president of the United States following the November 5 elections. The future occupant of the White House has repeatedly attacked Powell and his very restrictive monetary policy, accusing him of “having done more damage to the US economy than Chinese President Xi Jinping” in some rallies.
Powell, however, dryly replied that, too if the new US president asks him to resign, he won’t do it. The Federal Reserve, like most of the central banks of democratic states, is an entity that is mostly independent of the government. Once the new president is appointed, not even a change of presidency can force him to resign before the end of his term.
For Powell that date is 2026at the end of the first year of Trump’s presidency. CNN has speculated that the new administration may not apply particular pressure to avoid a clash with Powell and simply wait for his mandate to expire. Possible replacements are the former Fed member Kevin Warsh and Trump’s former chief economist Kevin Hassett.
