"President Trump's Demand for Rate Cuts, No Impact" Resolute Powell [Fed Watch]

On the 7th (local time), Jerome Powell, Chairman of the Federal Reserve (Fed), decided to keep interest rates unchanged and stated that President Trump's demand for a rate cut does not "affect their duties at all."

President Trump has repeatedly demanded rate cuts from Chairman Powell, criticizing him as a slowpoke or a loser. Particularly at the end of last month, after Chairman Powell critically mentioned at an event that tariff policies could spur both inflation and economic slowdown, Trump threatened to fire him, saying he would resign quickly if he wanted.

However, after the FOMC meeting that day, Chairman Powell revealed that he had not changed his stance on tariff policies. In his opening remarks, he warned that if large-scale tariff increases continue, inflation could rise, economic growth could slow, and unemployment could increase, as the extent of tariff increases was greater than expected.

Although he did not use the term stagflation, he essentially saw it as a trigger to enter the path of stagflation. He particularly judged that the downward pressure on the economy had increased. When asked about his intuition regarding the future direction of the economy, he replied, "My intuition tells me that uncertainty about the economic path is very high and downside risks have increased."

However, he said there is no need to rush into rate cuts and that it is appropriate to be patient. He also reiterated his statement from the Chicago Economic Club on the 16th of last month, which angered President Trump, saying, "Without price stability, we cannot achieve long-term strong labor market conditions that benefit all Americans."

Chairman Powell also explained that the -0.3% growth in the U.S. economy in the first quarter was due to a sudden increase in imports, and that the opposite effect could occur in the second quarter, resulting in abnormally high figures. He also predicted that the first-quarter GDP figures could be revised upward in the future.

When asked if he had any plans to meet with President Trump, he said he could not imagine himself doing so, stating, "I have never asked to meet with any president first, and I will not do so in the future."

The U.S. stock market did not take Chairman Powell's remarks negatively. Although it fell at the moment the freeze measure was announced and during Powell's hawkish remarks, it closed higher as his comments that the U.S. economy is solid and that the first-quarter GDP figures, which had shown negative growth, could be revised upward.

Washington = Correspondent Sang-eun Lee selee@hankyung.com