Confronting Trump? Powell emphasizes the independence of the Federal Reserve and refuses to commit to the future path of interest rates

According to the Zhitong Finance APP, Federal Reserve Chairman Jerome Powell stated at a press conference on Wednesday that the Federal Reserve will continue to maintain independence in monetary policy formulation, emphasizing that it will not actively seek to meet with any president and refusing to make specific commitments regarding future interest rate paths, highlighting the uncertainty of policies under the current economic situation.

When asked whether he would actively seek to meet with Trump, Powell clearly stated, "This is not something the Federal Reserve Chairman should do. I have never done this, and I cannot imagine myself doing this." He further pointed out that the central bank does not need to provide advice to Congress on fiscal policy, just as the central bank does not wish for Congress to interfere with monetary policy. However, Powell also warned that the U.S. fiscal situation is on an "unsustainable path," and Congress has the responsibility to develop plans to bring federal debt back to a sustainable path.

During Powell's tenure, Trump has publicly criticized him multiple times, accusing his interest rate hike policies of harming the U.S. economy, even once calling him "the enemy of the U.S. economy." Recently, there have been reports that the White House is exploring how to fire Powell, but Trump later publicly stated that he "never intended" to remove Powell from office. After this statement, Trump continued to call for the Federal Reserve to cut interest rates.

When asked about the current risks facing the economy, Powell admitted that the upward risks of inflation and unemployment are "both rising," and the Federal Reserve needs to weigh between the two. He emphasized that the Federal Reserve will closely monitor the two key variables (inflation and employment) and make policy adjustments when necessary, stating, "If we see a significant deterioration in the labor market, we will certainly take supportive actions."

Recent data shows that the U.S. unemployment rate in April was 4.2%, still within the mainstream estimate of "maximum employment." However, compared to last year, the Federal Reserve has shown a higher tolerance, allowing a certain degree of slowdown in the labor market to combat persistently high inflation.

In response to the market's heightened focus on interest rate cuts, Powell stated that the Federal Reserve is currently adopting a "wait-and-see" strategy and will not preemptively adjust interest rates due to anticipated economic slowdown. He pointed out that due to the significant uncertainty surrounding trade policies, tariffs, and other variables, the Federal Reserve "cannot judge in advance how the data will evolve," and therefore will "wait for clearer data guidance before deciding on policy direction."

Regarding the preliminary data showing a 0.3% annualized contraction in GDP for the first quarter, Powell believes this result is mainly distorted by export fluctuations. He noted that if these abnormal factors are excluded, the fundamentals of the U.S. economy remain robust, with private consumption and government spending still growing at an annualized rate of 3%.

Powell also responded to external criticisms regarding the Federal Reserve's "overstepping of functions," particularly in addressing climate change and implementing quantitative easing policies. He stated that the unconventional measures taken by the Federal Reserve during the COVID-19 pandemic were in a "state of emergency," emphasizing that he welcomes public questioning and admitted that "the communication of quantitative easing could indeed be improved." He also acknowledged that, in retrospect, the Federal Reserve "could have reduced QE earlier and faster."

In addressing climate issues, Powell reiterated that the Federal Reserve will not act as "climate policymakers," and its responsibilities in this area are very limited. He emphasized, "We do very little on climate issues." In the outlook for the U.S. economic prospects, Powell pointed out that inflation is slightly above the 2% target, but "core inflation is in good shape," and the labor market is close to full employment, so the Federal Reserve currently "does not need to act hastily," and its policy tools are "adequately prepared." However, he also warned that if the large-scale tariffs announced by the Trump administration are ultimately implemented, it could push up inflation, drag down economic growth, and lead to rising unemployment.

Regarding whether there is still a possibility of a "soft landing," Powell chose to avoid the question. He stated that although inflation has significantly retreated from its peak and the labor market is normalizing, given the uncertainties surrounding tariffs and fiscal policy, "it is currently difficult to determine whether the Federal Reserve can achieve the goal of price stability without sacrificing employment."

Powell summarized at the press conference: "We are in a complex situation. The risks of inflation and unemployment are both rising, and we will remain vigilant and make adjustments based on the data."