After the Federal Reserve decided to cut rates by 25 basis points on Thursday local time, Federal Reserve Chairman Powell stated that he would not resign even if Trump asked him to.

During the post-meeting press conference, when asked if he would resign if Trump asked him to step down, Powell responded firmly: 'No.' He also stated that any dismissal or demotion of Federal Reserve Board leaders, including himself, is 'legally not allowed.' CNN previously reported that a senior advisor to Trump revealed that Trump may allow Powell to complete his remaining term. Fed watchers had speculated that if Trump forced Powell to resign, Powell would step down before his term ends in May 2026. Powell's response, however, has left no doubts for the market that he will serve in this position until the end of his term. Some analysts point out to remember that Powell was once a lawyer. Powell is very resolute against any political threats facing the Fed. He is evidently ready to resist any political pressures they may face. Other analysts suggest that it is now important to see whether Trump himself will respond to Powell's comments regarding the president's lack of authority to dismiss the Fed Chair or Vice Chair.

Powell stated that the U.S. presidential election will not have 'any impact' on the Fed's policy decisions in the short term, and pointed out that it's too early to know the timing or contents of any potential fiscal policy changes. Powell said the Fed can adjust policy restrictions more slowly or quickly. If the economy remains strong and inflation fails to fall to 2%, policy adjustments could be more gradual. If the labor market deteriorates, action may be taken more quickly. 'As we approach the neutral interest rate, it may be necessary to slow the pace of rate cuts.'

This time, Federal Reserve officials unanimously decided to lower the federal funds rate to a range of 4.5% - 4.75%. This is the second consecutive rate cut after a significant 50 basis points cut in September, further solidifying the foundation for U.S. economic expansion. There was a significant difference this time as Fed Board Member Bowman did not object (she dissented against the previous 50 basis points cut).

Powell said: 'Further adjusting our policy stance will help maintain the strong momentum in the economy and labor market, and as we gradually move towards a more neutral stance, continue to push inflation further ahead.'

His remarks come after Trump's reelection this week, who has openly criticized him and explored the possibility of firing him during his first term at the White House. Trump has also pledged to deploy more aggressive tariffs, crackdown on immigration, and extend tax cuts – policies that could create upward pressure on prices and long-term interest rates, prompting the Fed to scale back rate cuts.

Powell said: 'We do not know the timing and substance of any policy changes. Therefore, we do not know what impact these policies will have on the economy, specifically, whether and to what extent these policies will affect our objectives - maximum employment and price stability.'

When asked if the Fed is considering pausing rate cuts in December, Powell stated that as officials shift the monetary policy stance to neutral, they have not yet determined what policy action the central bank will take in December. He said, "In the face of uncertainty, we are prepared to adjust our assessment of the appropriate pace and ultimate goal of our monetary policy. If the labor market deteriorates, the central bank will be prepared to act more quickly. Slowing the pace of the restrictive rate stance reduction may also be appropriate."

In a statement released on Thursday by the Federal Open Market Committee (FOMC), the committee continues to see risks to achieving its employment and inflation goals as "roughly balanced." "Economic prospects are uncertain, and the committee is concerned about risks on both sides of its dual mandate."

While policymakers noted progress in achieving the inflation target, they no longer express "greater confidence" that inflation can sustainably move toward 2%. This is the most significant part of the statement. However, Powell stated that the omission of confidence wording changes in the statement does not imply any hints about inflation stickiness, "We believe now is not the right time for a lot of forward guidance."

The committee made slight modifications to the wording regarding the labor market. The Fed stated in the release, "Since earlier this year, labor market conditions have generally eased, the unemployment rate has risen slightly, but remains low." Powell described the labor market as "robust."

After the Fed's ultra-large-scale interest rate adjustments began the easing cycle, policymakers indicate a preference for a more cautious and careful approach to future rate cuts. Powell reiterated that officials are not eager to lower borrowing costs.

Powell stated that the Fed is monitoring the rise in long-term bond yields, attributing it to a stronger view of economic growth. He also mentioned that bond rates will have to remain high until the Fed makes a conclusive assessment of their impact on the economy. Futures markets indicate a high probability of another significant rate cut in December. U.S. interest rate futures price in a further 67 basis points rate cut by the Fed in 2025.

Wall Street Interpretation

During the announcement of the interest rate decision by the Fed and Powell's speech, spot gold surged $50 intraday, an increase of 1.88%. Spot silver extended its intraday gain to 3%, breaking through $32 per ounce. The US dollar index fell by 80 points, marking the largest drop since August. The dollar against the yen fell by 1% intraday. U.S. stocks continued their post-election rally, with the S&P 500 index approaching 6,000 points and hitting the 49th record high this year.

"Federal Reserve megaphone" Nick Timiraos said that the Fed is expected to cut interest rates by 25 basis points. This decision was unanimously approved. The changes in the FOMC statement are minimal.

Analyst Smialek stated that the Fed's statement almost gave no clear signal on future rate cuts, and did not comment in any way on this week's US elections. This is not surprising, as the Fed operates independently of politics, trying to avoid involvement in major partisan moments.

Diane Swonk of KPMG, the accountant, said that the Fed may cut interest rates in December, but it seems they want to maintain "flexibility" in the future. She said that one of the main challenges the Fed is currently facing is "communication" because this is not a period where they can provide "a lot of forward guidance".

Whitney Watson, Co-Head of Fixed Income and Liquidity Solutions at Goldman Sachs Asset Management, expects the Federal Reserve to cut rates by 25 basis points in December. Watson said, "However, stronger data and uncertainties in fiscal and trade policies mean that the risks of the Fed slowing down its easing pace are increasing. The word 'skip' may enter our vocabulary in 2025."

ANNEX Wealth Management Chief Economist Brian Jacobsen stated that the Federal Reserve did not add any drama to this week. A 25 basis point rate cut still keeps the federal funds rate in a restrictive range, but not as strict as before. Despite the Federal Reserve's statement that the risks to their employment and inflation targets are roughly balanced, they may need to italicize the word "roughly." Because the election has an impact, we can see that economic growth has improved slightly compared to the Federal Reserve's forecasts, but inflation has also increased slightly relative to their forecasts, requiring a more gradual pace of interest rate cuts. They do not need to retract the rate cut plan, but they also do not need to accelerate the pace of rate cuts.

Analyst Matthew Luzzetti of Deutsche Bank said that the Fed's decision today was 'easy,' but he is not too sure if December will be as easy. He said that after this rate cut, the decision next month may be 'controversial' as interest rates are approaching neutrality. Therefore, slowing down the pace of rate cuts may make more sense for some.

Macro evaluation from Capital Economics stated that today's Fed interest rate decision leans towards the hawkish side. "Considering all factors, we now expect the Fed to end this loose cycle earlier than before. We anticipate an additional 25 basis point rate cut at each meeting before May next year, with rates bottoming out between 3.50% and 3.75%, 50 basis points higher than our prediction before the election.

Analyst Samuel Thomas at Pantheon Macro said in a report that the Federal Reserve is "delaying" until the fiscal outlook becomes clearer. He mentioned that the Federal Reserve, as expected, cut interest rates by 25 basis points, with the statement being almost a replica of the September statement. However, Thomas stated that Federal Reserve officials will have to make a temporary assessment of the new fiscal policy outlook next month, when they release a summary of quarterly economic forecasts. Pantheon Macro expects the Federal Reserve to further cut interest rates by 25 basis points in December, hinting at a further 100 basis point cut in 2025.

Analyst Dan Siluk at Janus Henderson Investors stated in a report that the Federal Open Market Committee (FOMC) deleted the wording 'with more confidence' from the statement about 'inflation is sustainably moving toward 2%', indicating that the Federal Reserve will need to proceed cautiously in the future. This change may reflect officials' more cautious or mildly optimistic attitude towards the inflation trajectory of the Federal Reserve's 2% target. By removing the phrase 'with more confidence,' the Federal Reserve may also be indicating that it is prepared to flexibly respond to upcoming data.

Makena Capital Management's Co-Chief Investment Officer Jackson Garton stated that Powell remained silent on providing new forward guidance in his press conference and did not comment on changing the economic outlook summary. Short-term US bond yields remained almost unchanged during Powell's speech. Garton still believes that the Fed may choose to cut rates in December, but is uncertain. He said: "I think there's over a 50% chance of another 25 basis point rate cut at the next meeting, but I'm not 100% sure."

Quilter Investors analyst LindsayJames indicated in a report that the pace of future rate cuts by the Federal Reserve seems far less certain than the widely expected rate cut before the decision. "The volatility in the job market data has cast a shadow over the outlook, as has Trump's victory," said the investment strategist. "Expectations for future rate cuts by the Federal Reserve are being significantly reduced compared to what many initially hoped for."

Salman Ahmed, the Director of Global Macro and Strategy Asset Allocation at Fidelity International, stated that considering the space for further inflation from fiscal stimulus policies next year, the Fed's terminal rates may bottom out above the priced-in levels. In fact, if the impact of further inflation and inflation resurgence driven by tariff policies occurs, rate hikes may have to be put on the agenda. As expected, the Fed cut rates by 25 basis points and adjusted its language to be more cautious about the future monetary policy path. Even in December, due to Powell's abandonment of any guidance on the speed and scale of rate cuts, the constraint of data has increased a notch.

Aditya Bhave of Bank of America stated: "We believe Powell's remarks overall are dovish, as he has repeatedly stated that a rate cut in December is still his basic judgment. Considering that the policy mix will not change for a while, we remain confident in our call for another 25 basis point rate cut in December."

Tiffany Wilding of Pacific Investment Management Company stated, "Powell mentioned a reduced downside risk to economic activity, while also emphasizing that long-term inflation expectations remain stable. This indicates that the Fed will continue to adjust policy rates gradually and has opened the door for a possible pause in December."

Editor/rice