Analysts at ANZ point out that the Fed Chair Powell speaks Friday at the annual Jackson Hole Economic Policy Symposium amid vocal criticism from President Trump over rising US interest rates.
Key Quotes
“Comments from President Trump, that the Fed should do “what’s good for the country” are likely to fall on deaf ears, and it would be staggering if Powell referred the remarks.”
“The objectives of the Board of Governors and FOMC are very clear and are to set monetary policy consistent with the economy’s long-run potential to promote maximum employment and stable prices.”
“Changing the Fed’s mandate would require a change to the Federal Reserve Act. Central bank independence has been a cornerstone of policies to stabilise inflation and one of the benefits of that has been to reduce volatility of business expansions and maximise employment.”
“The reality is that current annualised GDP growth rates of around 4.0% have much to do with President Trump’s expansionary fiscal stance. With inflation above target and unemployment below its estimated long-run potential, further gradual policy normalisation is appropriate.”
“Real policy rates are still negative and financial conditions have eased despite the fact that rates have been raised five times since President Trump was elected.”
“Chair Powell may well underline the need for further policy normalisation this Friday, and it will be interesting to see what he says about the evolution of monetary policy in his speech titled “Monetary Policy in a Changing Economy”.”
“This Friday’s speech may provide some insights on how Powell sees the monetary policy framework evolving under his stewardship and we do not believe that that will include a ‘politicisation’ of Fed policy decisions.”
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