At least we now know that Jerome Powell has no intention of resigning as Fed Chair if asked to do so by the President. That should offer markets some consolation in terms of continuity on monetary policy and that a steady hand will be at the helm for the foreseeable future. However, should Mr. Trump decide he wants the Chair out of office in spite of all, it could set up an ugly legal battle that would still leave the White House with little influence over the direction of monetary policy, even if it won.
In any case, Powell’s remarks today left open that the FOMC could further reduce its expectations for removing interest rate accommodation if the economic data counsels restraint. Powell also indicated the reductions in the balance sheet are going to continue on autopilot in the background. He noted that part of the reason for that was to ensure that the Fed’s primary tool for adjusting monetary policy — short-term interest rates — remains the focus and is not confused with other tools.
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