DIGIVESTASI - The Fed Holds Interest Rates, Powell Reaffirms Independence from Political Influence, Federal Reserve Chairman Jerome Powell has reaffirmed that the central bank's decisions are not influenced by political pressure, including from President Donald Trump. Speaking on Wednesday (Jan 29), Powell addressed concerns about the impact of Trump’s administration on monetary policy, stating that the Fed’s decision to exit a global climate-focused group was unrelated to political considerations.

The Fed maintained its benchmark interest rate at 4.25%-4.5% after three consecutive rate cuts, totaling 100 basis points. This decision aligned with market expectations.

"There may be some indications that reinforce the Fed’s independence, considering President Trump’s call for lower interest rates," said Peter Grant, Vice President and senior metals strategist at Zaner Metals, as quoted by Reuters. "However, I believe the policy trajectory remains largely unchanged, so a rate cut may be postponed until mid-year."

Following the Fed’s announcement, short-term interest rate futures indicated that investors now expect the central bank to delay further rate cuts until June 2025.

Powell Asserts Fed’s Independence from Political Pressure

Powell also addressed the Fed’s ongoing efforts to align its workforce policies with Trump’s executive order banning the promotion of diversity and inclusion. However, he suggested that any adjustments would remain within the bounds of existing laws.

Powell reaffirmed that diversity remains a hallmark of successful organizations. He also emphasized that the Fed will safeguard its independence in monetary policy decisions, resisting any political influence.

During his first term, Trump frequently criticized Powell and the Fed’s policies. Now, he is once again pressuring the central bank, demanding immediate rate cuts. However, Powell declined to comment directly on Trump’s statements.

"It would not be appropriate for me to comment on what the president has said," Powell stated. "However, the public should be assured that we will continue to focus on using our tools to achieve our objectives, without external influence."

Powell further emphasized that with inflation still above the 2% target, the Fed will wait for further signs of inflation cooling or labor market weakness before considering additional rate cuts. He also refused to speculate on how Trump’s policies on trade, immigration, taxation, and regulation might impact the economy.

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