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    Trump, Jay Powell and a Potential Fight over the Fed’s Future

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    As Trump allies including Elon Musk endorse ending the Federal Reserve’s independence, the central bank’s chair is reportedly ready to go to court to fight back.Jay Powell appears ready to defend Fed independence, and his job.Kent Nishimura/Getty ImagesA battle over the Fed’s future Donald Trump’s threat to exert more say over the Fed or even fire Jay Powell, the chair of the central bank, has alarmed some on Wall Street. But the president-elect’s effort took on added weight in recent days, after Elon Musk endorsed a push to erode the Fed’s independence.The fight shows how the future of the Fed could remain high on the agenda, and how far Musk’s influence — and the role of X as place for announcing policy positions — could extend across government.The Fed has its foes. Senator Mike Lee, Republican of Utah, introduced a bill in June to abolish the central bank, accusing it of being an “economic manipulator that has directly contributed to the financial instability many Americans face today.”Lee said on X that he wants to see the Fed under the president’s control — a view that Musk backed.Powell could turn to the courts to challenge any White House attempt to exert more control, according to The Wall Street Journal’s Nick Timiraos. Trump appointed Powell in 2017 but flirted with removing him shortly afterward. Powell held onto his job, but was ready for a fight if Trump made a move, Timiraos writes:Powell told then-Treasury Secretary Steven Mnuchin that he would fight his removal if sought by the president, according to people familiar with the matter. Trump was upset the Fed was raising interest rates against his wishes.For Powell, the unsavory prospect of a legal showdown — one he might have to pay for out of his own pocket — was imperative to preserve the ability of future Fed chairs to serve without the threat of being removed over a policy dispute.Powell has made it clear that the president doesn’t have the authority to remove a Fed chair. Last week, he said he wouldn’t step down if Trump asked him to do so after the central bank lowered borrowing costs by a quarter point. Removing him, he added, was “not permitted under the law.”A 1977 law gave Congress more oversight of the Fed, but enshrined the institution’s independence on policy.The central bank’s ability to set monetary policy without political influence is a core tenet for markets and the economy. The Fed also has an outsized influence through its freedom to buy and sell securities, like Treasury notes and bonds, as it looks to bring more liquidity to trading.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Powell, Fed Chair, Will Likely Face Heavy Pressure From Trump

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      The chair of the Federal Reserve made clear he would not resign, even under pressure. But pressure from the White House is likely, market watchers say.Jay Powell, the Fed chair, with President Trump during more tranquil times in 2017.Carlos Barria/ReutersPowell pushes back Jay Powell and the Fed may have pulled off the improbable soft landing in taming inflation while not crashing the economy into recession, proving many a Wall Street naysayer wrong.But an even bigger wildcard looms in another Donald Trump presidency — what Trump 2.0 might mean for interest rates, Fed independence and the Fed chair’s own job.That tension burst into the open at the Fed’s news conference on Thursday. The usually dry event had moments of high drama that nearly overshadowed the decision to cut the benchmark lending rate by a quarter percentage point. Powell delivered a forceful “no” when asked by Victoria Guida of Politico if he would consider resigning if Trump asked.He delivered a more emphatic response when pressed by another reporter on whether the president had the legal authority to fire him. “Not permitted under the law,” Powell said.Trump has made waves by saying that a president should have a say in rates policy. And suggestions have circulated from inside the president-elect’s camp that he would sideline Powell if re-elected — something Trump flirted with during his first term after appointing Powell in 2017.The S&P 500 advanced as the news conference wore on, closing at another record, and Treasury bonds also rallied.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Inflation Is Fading, Statistically and Politically

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      Last week was full of speeches. Most of those that attracted national attention were at the Democratic National Convention, culminating in Vice President Kamala Harris’s big moment on Thursday. But there was another important speech on Friday: Federal Reserve Chair Jerome Powell’s talk at the Fed’s annual shindig in Jackson Hole, Wyo.Yes, Powell’s remarks were of particular interest to investors looking for clues about future monetary policy. But even though his speech was rigorously apolitical, it had important political implications. For what we’re seeing, I’d argue, is inflation fading away — not just in the data, but also as a political issue. And that, of course, is very good news for Democrats.About Powell’s speech: He noted that the inflation rate has declined a lot since it peaked in 2022 and expressed confidence that it’s on track to reach the Fed’s target of 2 percent — and why it’s getting there without the mass unemployment some economists had claimed would be necessary. Falling inflation all but guarantees that the Fed will cut interest rates at its Open Market committee meeting next month, although the size of the anticipated cut is uncertain.What has brought inflation down? Like many economists, myself included, Powell believes that inflation was largely caused by “pandemic-related distortions” and that “the unwinding of these factors took much longer than expected but ultimately played a large role in the subsequent disinflation.”Although Powell didn’t and couldn’t say so explicitly, this analysis implicitly exonerates the Biden administration. Many people, like Elon Musk — who, after demonstrating his political acumen last year by boosting Robert Kennedy Jr., has lately decided that he’s an expert on macroeconomics — attribute inflation to Biden-era government spending. Powell’s discussion suggests, however, that fiscal policy played at most a distinctly secondary role.But few voters follow Fed speeches; won’t they continue to blame Democrats for inflation?Not necessarily. Surveys suggest that the political salience of inflation and the economy in general have been fading. It’s probably too late to convince voters that Democrats have done a good job managing the economy, even though that’s objectively the case — overall, America has outperformed other wealthy nations, achieving exceptionally high growth without exceptionally high inflation. But the economy is looking less and less like the, um, trump card Republicans were counting on.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Americans Growing Worried About Losing Their Jobs, Labor Survey Shows

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      The New York Fed’s labor market survey showed cracks just as Jerome H. Powell, the Fed chair, prepares for a closely watched Friday speech.Americans are increasingly worried about losing their jobs, a new survey from the Federal Reserve Bank of New York released on Monday showed, a worrying sign at a moment when economists and central bankers are warily monitoring for cracks in the job market.The New York Fed’s July survey of labor market expectations showed that the expected likelihood of becoming unemployed rose to 4.4 percent on average, up from 3.9 percent a year earlier and the highest in data going back to 2014.In fact, the new data showed signs of the labor market cracking across a range of metrics. People reported leaving or losing jobs, marked down their salary expectations and increasingly thought that they would need to work past traditional retirement ages. The share of workers who reported searching for a job in the past four weeks jumped to 28.4 percent — the highest level since the data started — up from 19.4 percent in July 2023.The survey, which quizzes a nationally representative sample of people on their recent economic experience, suggested that meaningful fissures may be forming in the labor market. While it is just one report, it comes at a tense moment, as economists and central bankers watch nervously for signs that the job market is taking a turn for the worse.The unemployment rate has moved up notably over the past year, climbing to 4.3 percent in July. That has put many economy watchers on edge. The jobless rate rarely moves up as sharply as is has recently outside of an economic recession.But the slowdown in the labor market has not been widely backed up by other data. Jobless claims have moved up but remain relatively low. Consumer spending remains robust, with both overall retail sales data and company earnings reports suggesting that shoppers continue to open their wallets.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Fed Chair Powell Signals a Retreat on Banking Rules

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      The Fed chair said regulators could scale back or rework a sweeping capital-requirements proposal that Wall Street has been fighting for months.Jay Powell, the Fed chair, stunned Wall Street yesterday with an apparent U-turn in bank regulation.Kenny Holston/The New York TimesJay Powell’s surprise For months, Wall Street C.E.O.s have been complaining bitterly and lobbying against the prospect of higher capital requirements, which would require them to keep more money on hand and would lower their profits. It appears they have scored a big win.Jay Powell dropped the bombshell in his testimony before the House on Wednesday. Markets were still digesting the Fed chair’s go-slow comments on interest rate cuts when he signaled that proposed new rules to force lenders to beef up their books would be scaled back, or reworked.“I do expect that there will be broad and material changes to the proposal,” he said.The capital rules, known as the “Basel III Endgame,” would apply to the largest banks. They would have to set aside a bigger emergency cushion to soak up losses stemming from shocks like the bank run last year that led to the collapse of Silicon Valley Bank and prompted a wider crisis.But the proposals have come under fire from bank chiefs, industry lobbyists, Republican lawmakers and even some liberal members of Congress, who fear that a mandate to set aside billions to fight the next potential crisis could feed another one.Critics fear that Basel III would crimp lending just as banks grapple with upheaval in commercial real estate. Lenders face a looming “maturity wall” of as much as $1.5 trillion in commercial real estate loans set to come over the next two years.That risk came into blaring focus during Powell’s testimony. The stock price of New York Community Bank, a Long Island-based lender with a mountain of souring real estate loans, plummeted on news it was seeking emergency funding. (More on that below.)We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Fed Chair Powell Still Expects to Cut Rates This Year, but Not Yet

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      Jerome H. Powell, chair of the Federal Reserve, said policymakers still expect to lower rates in 2024 — but the timing hinges on data.Jerome H. Powell, the chair of the Federal Reserve, said on Wednesday that he thinks the central bank will begin to lower borrowing costs in 2024 but that policymakers still needed to gain “greater confidence” that inflation was conquered before making a move.“We believe that our policy rate is likely at its peak for this tightening cycle,” Mr. Powell said in remarks prepared for testimony before the House Financial Services Committee. “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”The Fed next meets on March 19-20, but few investors expect officials to lower interest rates at that gathering. Markets see the Fed’s June meeting as a more likely candidate for the first rate cut, and are betting that central bankers could lower borrowing costs three or four times by the end of the year.The Fed chair warned against cutting rates too early — before inflation is sufficiently snuffed out — noting that “reducing policy restraint too soon or too much could result in a reversal of progress we have seen in inflation and ultimately require even tighter policy.”He also acknowledged that there could be risks to waiting too long, adding that “reducing policy restraint too late or too little could unduly weaken economic activity and employment.”Mr. Powell and his colleagues are trying to strike a delicate balance as they figure out their next policy steps. Policymakers raised interest rates rapidly between March 2022 and July 2023, lifting them to a range of 5.25 to 5.5 percent, where they currently sit. That has made mortgages, business loans and other types of borrowing more expensive, helping to tap the brakes on an economy that otherwise retains substantial momentum.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      Inflation Fears Stalk Presidential Politics and the Markets

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      Lawmakers on Capitol Hill are set to grill Jay Powell, the Fed chair, about interest rates and the economy, topics that are top of mind for voters and investors alike.Jay Powell, the Fed chair, will begin two days of testimony on Capitol Hill with inflation a hot topic for voters and markets.Richard Drew/Associated PressInflationary pressure and presidential politics President Biden and Donald Trump dominated Super Tuesday, setting the stage for a rematch of the 2020 election. One topic that’s high on the agenda for voters: Inflation.That means all eyes will be on Jay Powell, as the Fed chair makes a two-day appearance on Capitol Hill this week, for any sign of what’s next on rate cuts.Inflation is kryptonite for any politician, and especially for Biden. Trump again pounded the president on high prices, an issue that’s lifting the Republican in polls even as a range of indicators show that the economy is performing strongly.(The White House is putting the blame on corporations that “try to rip off Americans.” Watch for that theme at Thursday’s State of the Union address.)Powell will appear before the House on Wednesday and before the Senate on Thursday. Data published in recent weeks shows that jobs are plentiful, wages are rising and consumers are still spending. Analysts have upgraded their economic forecasts, raising hopes that a soft landing is likely.But market pros see warning signs. Concerns remain that inflation will stick above the Fed’s 2 percent target, forcing the central bank to put the brakes on interest rate cuts that traders expect to begin in June. The futures market on Wednesday is forecasting three to four cuts this year — down from nearly seven just weeks ago — and the more cautious sentiment has helped drag the S&P 500 lower this week.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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      The Jobs Conundrum: Questions About Wages Persist

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      The latest data on jobs and wages are positive on the surface, but a large group of voters are still downbeat about the state of the economy. Jobs seem plentiful, but a large group of voters are feeling downbeat about inflation and the economy.Spencer Platt/Getty Images‘The job’s not quite done’ The U.S. economy is a paradox. Official figures show that growth is solid, jobs are plentiful and wages are climbing, and yet voters are mostly feeling down and giving President Biden little credit.Friday’s jobs data is adding to that split-screen view, with economists pointing out red flags in an otherwise sterling report.The labor market seems to be performing strongly. Employers added 353,000 jobs last month, almost double economists’ forecasts, and an additional 100,000 via revisions in previous months. Average hourly wages rose, too.But that doesn’t necessarily mean workers are more prosperous. For a start, wintry weather shrank the average workweek to 34.1 hours in January. In particular, nonsalaried employees, especially those in retail, construction and the hospitality sectors, worked fewer hours, which probably ate into their pay, Bill Adams, an economist at Comerica Bank, said in a research note.And Goldman Sachs’s wage tracker for U.S. workers fell after Friday’s report on a quarterly annualized basis.Workers are increasingly anxious about changing jobs. Quit rates have fallen to a four-year low, suggesting employees are feeling less confident that they’ll find a better position elsewhere. If this trend persists, it could also put the chill on wage gains that soared during the so-called Great Resignation.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More