Jerome Powell, chairman of the U.S. Federal Reserve, rejected speculation that criticism by president Donald Trump influenced the Fed's decision to maintain interest rates at current levels. Trump has repeatedly blasted the Fed for raising interest rates, falsely claiming high rates stunt economic growth.
Powell strongly denied that Trump's relentless criticism of the Fed influenced its decision yesterday to maintain the federal funds rate at a range of 2.25% to 2.5%. The federal funds rate has a direct bearing on the cost of mortgages, credit cards, and other borrowings.
This decision by the Fed was large what Wall Street expected, and the Street reacted favorably with a welcome surge in stocks. The Dow Jones Industrial Average rose by 435 points; the S&P 500 closed 1.6% higher while the NASDAQ Composite gained 2.2%.
After its first two-day policy-setting meeting of 2019, the Fed said in a statement that it "will be patient as it determines what future adjustments to the target range." The Fed also released a separate statement to ease concerns about its balance sheet unwind, something Trump has specifically attacked.
"What we care about, and really the only thing we care about at the Fed, is doing our job for the American people and using our tools," said Powell. "We're always going to do what we think is the right thing, we're never going to take political considerations into account or discuss them as part of our work.
"We're human, we make mistakes, but we're not going to make mistakes of character or integrity. I wouldn't want the public to know that and I wouldn't want them to see that in our actions."
Powell's extraordinary statement again reaffirmed the Fed's independence from presidential control. Despite this, Trump decided to cash in on the good news by tweeting, "Dow just broke 25,000," he tweeted after the Dow closed up 435 points. "Tremendous news!"
Trump took full credit for the two other times in his administration the Dow broke the 25,000 level. The souring of the economy on account of his trade war with the world, however, resulted in Trump trying to make a scapegoat of Powell and the Fed for his failure as an economic manager.
In the past, Trump has said he's "not even a little bit happy with" Powell and declared the Fed is "way-off-base" with its monetary policy. In December 2018, Trump discussed firing Powell because of widespread losses in the stock market in the last three months of the year.
Taking a tough stand against Trump's scapegoating, Powell said on Jan 4 he wouldn't resign if Trump asked him to step down.
