Powell says December rate cut is not certain
Federal Reserve Chairman Jerome Powell said on Wednesday (October 29) that a December rate cut was “not a foregone conclusion” after the central bank cut interest rates by a quarter of a percentage point.
As President Donald Trump prepares to name the next Fed chairman, economists and former Fed officials say they worry that loyalty to the president will be a factor in future decisions.
The White House pushed back, saying President Trump is committed to appointing “the best and most qualified people” to key public institutions, including the central bank.
“It is the Fed’s self-proclaimed goal to make monetary policy decisions based on data,” White House Press Secretary Khush Desai said in comments to USA TODAY. “The data objectively shows that inflation is cooling and the environment is ripe for further rate cuts to provide much-needed cost relief to American businesses and homebuyers.”
Still, Fed watchers aren’t so convinced, even though Trump has been railing against the current Fed chairman for months.
A presidential choice can happen at any time. The last time President Trump announced a nomination to chair the Federal Reserve was on November 2, 2017, when he selected Jerome Powell.. Powell will be reappointed by former President Joe Biden, and his term as chairman will end in May 2026. Since retaking the White House in January, Mr. Trump has insulted Mr. Powell, calling him nicknames such as “too slow” and posting a slew of social media posts calling for lower interest rates.
Meanwhile, the FOMC is preparing for its final meeting of 2025, scheduled for December 9th and 10th. It’s unclear whether officials will adjust the benchmark interest rate, given the cooling labor market, persistent inflation and recent signs of divergence in government data.
U.S. Treasury Secretary Scott Bessent told CNBC there are “five very strong candidates” and said there is “a very good chance” the president will make an announcement before Christmas.
Why this appointment matters
The Federal Reserve Chair is the most visible position at the nation’s central bank and is responsible for leading U.S. monetary policy efforts to promote price stability and maximum employment.
“All Americans understand the importance of both of these things in this current situation, this affordability crisis,” said Mark Zandi, chief economist at Moody’s Analytics. “No one is better positioned to achieve these goals for the American people than the Fed chairman.”
As a member of the Fed’s Board of Governors, he also helps oversee the regulation of banks and other financial institutions.
Few companies have comparable influence over the U.S. economy. The Fed chair’s comments can move markets within minutes, impact borrowing costs and shape economic expectations.
“The risks here are very high because global investors and capital markets are watching,” said former Atlanta Fed President Dennis Lockhart.
They report to Congress, testify before Congress, meet regularly with the Secretary of the Treasury, and often speak directly to the American people after Federal Open Market Committee meetings.
Traditionally, they also chair the committee that sets the target range for the federal funds rate, the benchmark that influences interest rates on credit cards, loans, and savings accounts across the country.
What President Trump is probably looking for
David Beckworth, a senior fellow at George Mason University’s Mercatus Center, said Trump is looking for loyalty and someone he can trust to help push for rate cuts.
Bessent is leading the search, although the final decision rests with the president. Narayana Kocharakota, a former president of the Federal Reserve Bank of Minneapolis, said he believes Mr. Bessent wants someone who can run the Fed without wasting resources and accomplishing the goals Congress set for the organization.
“On the one hand, I think President Trump’s view is that he’s looking for people who are loyal to his administration,” Kocharakota said. “It’s a real divide.”
Peter Conti-Brown, a professor at the Wharton School at the University of Pennsylvania, said Mr. Bessent understands that the credibility of the United States depends on the credibility of the Fed, and that is reassuring “in a sense.”
But Trump’s past nominations have not inspired confidence in Contee-Brown. He said the president’s recent appointee to the Federal Reserve Board, Stephen Millan, “didn’t have the relevant expertise.” So did Judy Shelton, Trump’s board nominee who failed to pass Senate confirmation in 2020, he added.
“If that’s a precursor to them making an appointment like this to the Fed chair, that’s not a good sign,” Conti-Brown said.
Beckworth added that he believes the interest burden on the national debt is a motivating factor for President Trump’s call for interest rate cuts. The president may want a chairman who understands the growing fiscal pressures and someone who supports greater crypto facilitation at the Fed.
Who fits the profile?
On November 18, President Trump told reporters that he thought he already knew his choice. He pointed to Mr. Bessent and said he wanted the Treasury secretary to take on the role, but Mr. Bessent rejected the offer.
“Some of the names are surprising, and some are standard names that everyone is talking about,” Trump said. “We might go the standard route. It’s good to be politically correct once in a while, but we have some great names.”
In August, President Trump confirmed he was considering former Federal Reserve Board member Kevin Warsh and National Economic Council director Kevin Hassett for the role. Bloomberg recently reported that Hassett is the frontrunner.
Mr. Beckworth said a “surprise” name could mean someone like Mr. Milan, with the frontrunner being Christopher Waller, the Fed’s director. Beckworth said Waller has recently advocated lowering interest rates and is respected by other Fed officials.
“He could probably lead a divided FOMC better than any other option,” Beckworth said. “Kevin Hassett or Kevin Warsh — they’re going to come in as outsiders, as people who were really critical…Now you have to come and lead the people you’ve been critical of.”
How the Fed could change under new leadership
Kocharakota said if the next Fed chair is seen to set interest rates in line with the president’s political goals, markets will assume rates will stay low even when they should rise, potentially raising long-term inflation expectations.
“For example, people who take out mortgages will feel that they have to be compensated for any future inflation,” Kocharakota said, adding that if the new chairman “is seen as too beholden to the president, long-term interest rates could rise very significantly.”
The Fed chair has tremendous influence, but he cannot act alone. The FOMC, which sets the federal funds rate, has 12 voting members.
“The new chair must earn the trust and respect of the Federal Open Market Committee and its staff, be resolutely nonpartisan and apolitical, and respect the prevailing ethics of making decisions by consensus and relying on data,” Lockhart said. “If the chair doesn’t have that respect, and I’m going to speculate here, there’s a good chance that someone else on the committee will become an important informal voice on that committee.”
He said he believes the current lineup of Fed directors can be expected to maintain the central bank’s independence.
Beckworth added that even if Trump’s appointees ultimately form a majority of the seven-member Fed board, its members won’t always agree.
what happens next
Once Trump nominates, that person must be confirmed by the Republican-controlled Senate.
Lockhart said he is not confident that senators will confirm just the people Trump wants.
“Behind closed doors, senators are very responsible for the quality of the people they put into the job,” Lockhart said. “If a ‘surprise’ candidate is recommended who senators did not think was qualified, there could be significant backlash.”
Because President Trump is likely to announce his nominations far in advance, a candidate’s views on the economy and monetary policy may begin to carry more weight before they take on the role.
“I hope the candidates will try to stay out of Jay Powell’s way while he’s in the chair,” Zandi said. “It will also indicate how independent the Fed will remain. If Jay Powell’s voice is respected, that’s a good sign that independence will remain.”
Contact Rachel Barber rbarber@usatoday.com X Follow her at @rachelbarber_
