Fed cuts rates, chair says he won't quit if Trump asks

What happened

The Federal Reserve cut its benchmark interest rate by a quarter of a percentage point Thursday, as expected, to the 4.50%-4.75% range. But Fed Chair Jerome Powell was noncommittal on future rate cuts that were expected before Donald Trump won the presidential election.

Who said what

The "elephant in the room at the Fed" was Trump's plan for the economy, CNN said. His "blanket tariff proposals and aggressive tax cuts translate to more inflation just as the Fed is taking its victory lap." The Fed was designed to have "considerable autonomy" so it can "respond to high inflation by raising interest rates — often an unpopular measure," The Wall Street Journal said. Trump "appointed Powell as chair in 2018, then later demanded he stop raising rates, and subsequently that he cut them."

Powell declined, and Trump considered firing him — until his advisers "concluded that doing so would be difficult if not impossible," The New York Times said. Powell said yesterday that firing him was "not permitted under the law," and he would not step down if Trump asked him to.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

What next?

With inflation back near the Fed's 2% target, healthy economic growth and low unemployment, the central bank is "feeling good about economic activity," Powell said, and "by December, we'll have more data" to decide whether to cut rates again.

Powell's term as chair expires in May 2026, and Trump's "most direct way of increasing his influence at the central bank would be to install loyalists on its seven-member board of governors," the Journal said. But Powell will remain a governor until 2028, and Trump is scheduled to have just one other board vacancy to fill. "None of that," the Times said, is likely to keep Trump "from publicly commenting on Fed policy, something he did frequently in his first term."