All of which follows a steady pattern,well established during his tenure, using established criteria of looking at the data on inflation and unemployment to meet the twinned mandate of the Federal Reserve, inflation at 2 percent, and full employment. But, despite this traditional approach, President Trump has been not just unhappy with it, but has made disparaging remarks about Powell and his intelligence, and wants to see greater rate cuts; and, in the recent past has called for cuts as deep as 3 percent, a figure that many economists believe could lead to inflation, and possibly a recession.
The traditional independence of the Fed has been in the public eye especially since Trump’s second term, and in response to questions asked at the press conference, after the meeting, about the implications of politics in FOMC decisions, the Chair replied, “It’s just an institutional arrangement that has served the people well,” he said, “and If politics get in the way, it would create the perception that the bank would act in the interest of one group or another, rather than the broader public,” adding that, “If you lose that, first of all it would be hard to restore the credibility of the institution.”
There were two dissenters, supporting the president in wanting at least a quarter point cut, and they were Trump’s handpicked board members, Stephen Miran and Christopher Waller.
While inflation has cooled to 2.7 percent, it is still a matter of concern for the Fed but Powell said to the media, and reported by The New York Times,"We still have some tension between employment and inflation,” and noted, “but it has waned a bit. That means there’s less risk of an acceleration in inflation and also of a serious deterioration in the labor market.”
Core inflation as measured by the PCE, the Fed’s “preferred inflation measure — is just above 2 percent, stripping out tariff effects,” they added; but, “Powell said he takes a lot of solace from indications that consumers think inflation won’t be too hot either over the short or the longer term. “Expectations have been solid, and they reflect confidence in the return to 2 percent inflation,” and in an opined they reported, “If consumers start to think that prices will rise, it’s more likely they will, because workers will demand higher wage increases to compensate.”
The December 2025 Index increased on a seasonal basis to 0.3 percent, and over the last 12 months increased 2,78 percent, again seasonally adjusted, with the largest increase to 0.4 percent was for shelter and “was the largest factor in all the time's monthly increase,” in the Bureau of Labor Statistics report released last month.
Taken together there is cause for vigilance by the Fed, and of course the White House.
With eyes set on future developments Powell said, “We don’t take things off the table but it isn’t anybody’s base case right now,” in response to questions of a rate hike.
It’s been widely reported that Trump is focused on Powell’s replacement after his term empires this May, and he said on Thursday at a Cabinet meeting, "Next week ... we're going to be announcing the head of the Fed, who that will be, and it'll be a person that will, I think, do a good job."
On Friday he did just that, selecting former Federal Reserve Governor Kevin Warsh to be the next chair, and as reported by Investopedia, “Warsh, who served as a Fed governor between 2006 and 2011, beat out several finalists for the job, including Trump economic advisor Kevin Hassett and BlackRock executive Rick Rieder. Warsh will take over as Fed chair after Jerome Powell's term expires in May, assuming he is confirmed by the Senate.
"I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best," Trump wrote in a social media post Friday morning.”
Warsh, a former Morgan Stanley banker, “had long been considered one of the front-runners for the president’s nomination. And, during his tenure he became “the youngest governor in the bank’s history, and served as its liaison to Wall Street during the 2007-08 financial crisis,” according to The Hill.
Warsh needs Senate confirmation, and this is not a slam dunk, and “Republican Sens. Thom Tillis (N.C.) and Lisa Murkowski (Alaska) have vowed to oppose anyone the president nominates to the role while the Justice Department is conducting a criminal probe into the bank and Powell,
Tillis could also use his perch on the Senate Banking Committee to hinder Trump’s Fed nominees from being approved by the panel, which is a key procedural step on the way to a full Senate confirmation vote,” they added in their reportage.
In what is now apparently a full blown political tempest, “Tillis and Murkowski’s support could be critical for Warsh with Senate Democrats unlikely to give him much, if any, support. Democrats are also fuming over Trump’s attempt to fire Fed board member Lisa Cook, whose challenge to the president’s order was heard last week by the Supreme Court.”
He has “accused the Fed under Powell of using independence as a shield from accountability, and said members of the bank should “grow up” and “be tough” in the face of criticism.”
There is more than affinity for interest rate cuts and a record of critiquing the Fed under Powell, there is this: “The nominee also shares close political connections to Trump. His father-in-law, cosmetics heir Ronald Lauder, has donated millions of dollars to Trump and Republican candidates, and was reportedly behind the president’s quest to purchase Greenland.”
Some economists according to USA Today said that Warsh may not be as docile as expected, leading us to think that in the foreseeable future, could Warsh turn out to be like Powell?
