The US Federal Reserve chief Jerome Powell last night defied Donald Trump as the central bank left interest rates on hold and said that it was in no hurry to make further cuts.
And he mounted a robust defence of the Fed’s independent decision-making, saying: ‘Don’t look for us to do anything else.’
In its first rates decision since Trump’s inauguration, America’s central bank held firm in a range of 4.25 per cent to 4.5 per cent.
Last week, the country’s new president declared in an address to the World Economic Forum in Davos that he wanted to see rates drop ‘immediately’, setting up a clash with the Fed.
But Powell refused to budge yesterday, saying: ‘We do not need to be in a hurry to adjust our policy stance.’
He declined to respond when asked about Trump’s comments, adding that he and fellow rate-setters would be ‘keeping our heads down and doing our work’.
US Federal Reserve chief Jerome Powell (pictured) mounted a robust defence of the central bank’s independent decision making, saying: ‘Don’t look for us to do anything else.’
Asked if the president had been directly in touch to relay his demand, Powell said: ‘I have had no contact.’
In a defence of the Fed’s independence, he said: ‘This is who we are, this is what we do.
‘We study the data, we analyse how it will affect the outlook and the balance of risks and we use the tools to try to – given our best understanding, our best thinking – achieve our goals.
‘That’s what we do, that’s always what we always do – don’t look for us to do anything else.
‘Lots of research shows that’s the best way for a central bank to operate.’
In its statement, the central bank dropped language saying that inflation ‘has made progress’ towards its goal of bringing inflation down to its 2 per cent goal.
That change of language was seen by some as a hawkish move because if the Fed is not winning the battle against inflation it will not want to cut rates.
Last month, US inflation rose to 2.9 per cent. Powell played down the implications saying it was ‘not meant to send a signal’.
And he indicated that the Fed was in wait-and-see mode as the fall-out from Trump’s threatened policies on tariffs, immigration control and tax cuts, which are widely predicted to add to inflation, become clear.
Isaac Stell, investment manager at Wealth Club, said: ‘The Fed have chosen to take the cautious path, no doubt with a keen eye focused on how President Trump’s potential tariff plans impact the wider economy.
‘On this occasion, the tail is not wagging the dog. However this may be to Jerome Powell’s detriment with the decision unlikely to curry favour with the new administration.’
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