The Federal Reserve won’t be handing President Trump his rate cuts on a silver platter.
Fed officials acknowledged on Tuesday that weakening economic conditions may merit lowering interest rates in the coming months, but they poured cold water on the idea that any cuts would be swift and influenced by Trump’s demands.
“The Fed is insulated from short-term political pressures — what is often referred to as our ‘independence,’” Fed Chairman Jerome Powell said in a defiant speech, warning of “damage that often arises when policy bends to short-term political interests.”
The Dow Jones industrial average fell 199.84 points before recouping its losses slightly, to end down 179.32 points — or 0.7 percent — at 26,548.22.
The S&P 500 and Nasdaq were off 1 percent and 1.5 percent, respectively.
Powell’s comments, delivered before the Council on Foreign Relations in New York, came after Trump tweeted Monday that the Fed “blew it” by raising rates too quickly last year.
“Think of what it could have been if the Fed had gotten it right,” Trump tweeted.
“Thousands of points higher on the Dow, and GDP in the 4’s or even 5’s. Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it!” he added.
Powell wasn’t the only Fed official not caving to Trump.
James Bullard, president of the Federal Reserve Bank of St. Louis, shot down the notion that the Fed would cut rates by half a point at its July meeting.
“I think 50 basis points would be overdone,” Bullard told Bloomberg, despite the fact that he’s among the Fed’s least hawkish governors. “I don’t think the situation really calls for that. But I would be willing to go 25.”
Fed officials held rates steady after their two-day meeting last week but signaled that two cuts could come before the end of the year.
Powell reiterated Tuesday that any rate changes would depend on economic data, not politics.
“We’re human, we’ll make mistakes — I hope not frequently — but we’ll make mistakes but we won’t make mistakes of integrity or character,” Powell said.
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