Fed's Powell rejects idea politics has any bearing on policy choices
Adds additional comments from Powell, background, analyst reaction starting in paragraph 3
By Michael S. Derby
July 31 (Reuters) - U.S. FederalReserve Chair Jerome Powell said on Wednesday political considerations play no part in either near-term monetary policy deliberations or the central bank's longer-run forecasting work.
"We don't change anything in our approach to address other factors like the political calendar," Powell said at a press conference that followed the most recent meeting of the central bank's rate-setting Federal Open Market Committee. "I'll say this too: We never use our tools to support or oppose a political party, a politician or any political outcome."
Powell addressed the Fed's intent to stay out of the political fray as the central considers a possible rate cut in September, less than two months before the November presidential election.
While the FOMC left rates steady and maintained its interest rate target range at between 5.25% and 5.5%, where its been for a year now, easing inflation data has almost certainly opened the door to a rate cut in the next few months. In his press conference Powell wouldn't commit to an action but strongly suggested that if the data continues on its current path, a rate cut at the Fed's next meeting on Sept. 17-18 was possible.
If the Fed cuts rates in September, it would likely set the central bank up for criticism from Republican presidential contender Donald Trump. When he was last in office, the former president was a sharp critic of the Fed and Powell. In a recent Bloomberg Businessweek interview, he said a pre-election rate cut is "something that they know they shouldn’t be doing,” presumably because easier borrowing conditions might favor his presumptive Democratic opponent, Kamala Harris.
Fed officials have consistently argued that politics do not bear on their monetary policy choices and Powell reiterated that point in his press conference, saying it's the data alone that will make the call for when the Fed is able to cut interest rates.
"This is my fourth presidential election at the Fed," Powell said, and with that experience, any monetary policy choice "will be based on the data, the outlook and balance of risks and not on anything else."
FORECASTING FACTORS
Powell also said that potential changes in the nation's political direction are not something central bankers will take on board as part of their longer-range forecasts, which are made public on a quarterly basis, with the next update due in September.
"We absolutely do not do that," Powell said, noting the inherent uncertainty in knowing who might win a given election.
While it's possible to "run simple simulations of different potential policies" a government might pursue, changing actual Fed policy to reflect these types of shifts is "a line we would never cross," Powell said, adding "we don't want to be involved in politics in any way, so we wouldn't do that."
The question of whether the Fed should factor a change in administration or control of Congress into its forecasts and policy outlook is being driven by Trump's economic agenda. Experts across ideological stripes believe the former president's pro-tariff, anti-immigration and tax-cut agenda means inflation would again rise.
For some, those risks might mean the Fed needs to rethink some of its longer-run hopes for rate cuts and lower inflation. Some former Fed officials have even argued in favor of factoring that outlook in, although current officials have rejected that view.
Derek Tang, an analyst at LHMeyer, a forecasting firm, is skeptical the Fed can shrug off politics' impact on forecasts.
"Powell acknowledged that they run alternative scenarios but then denied that it filters through to their forecasts," Tang said. "This does not seem believable given that the 2025, 2026, (and, in September, 2027) macro projections and dots are a crucial piece of their forward guidance," and for those forecasts to be taken seriously, Fed watchers would need to know the central bank is thinking about how shifts in government policy will affect the economy, he said.
Reporting by Michael S. Derby; Editing by Leslie Adler and Andrea Ricci
Últimas noticias
Descargo de responsabilidades: Cada una de las entidades de XM Group proporciona un servicio de solo ejecución y acceso a nuestra plataforma de trading online, permitiendo a una persona ver o usar el contenido disponible en o a través del sitio web, sin intención de cambiarlo ni ampliarlo. Dicho acceso y uso están sujetos en todo momento a: (i) Términos y Condiciones; (ii) Advertencias de riesgo; y (iii) Descargo completo de responsabilidades. Por lo tanto, dicho contenido se proporciona exclusivamente como información general. En particular, por favor tenga en cuenta que, los contenidos de nuestra plataforma de trading online no son ni solicitud ni una oferta para entrar a realizar transacciones en los mercados financieros. Operar en cualquier mercado financiero implica un nivel de riesgo significativo para su capital.
Todo el material publicado en nuestra plataforma de trading online tiene únicamente fines educativos/informativos y no contiene –y no debe considerarse que contenga– asesoramiento ni recomendaciones financieras, tributarias o de inversión, ni un registro de nuestros precios de trading, ni una oferta ni solicitud de transacción con instrumentos financieros ni promociones financieras no solicitadas.
Cualquier contenido de terceros, así como el contenido preparado por XM, como por ejemplo opiniones, noticias, investigaciones, análisis, precios, otras informaciones o enlaces a sitios de terceros que figuran en este sitio web se proporcionan “tal cual”, como comentarios generales del mercado y no constituyen un asesoramiento en materia de inversión. En la medida en que cualquier contenido se interprete como investigación de inversión, usted debe tener en cuenta y aceptar que dicho contenido no fue concebido ni elaborado de acuerdo con los requisitos legales diseñados para promover la independencia en materia de investigación de inversiones y, por tanto, se considera como una comunicación comercial en virtud de las leyes y regulaciones pertinentes. Por favor, asegúrese de haber leído y comprendido nuestro Aviso sobre investigación de inversión no independiente y advertencia de riesgo en relación con la información anterior, al que se puede acceder aquí.
