Powell says he would not resign as Fed chair if Trump asked

Faith Castro
January 7, 2019

Fed watchers have said that the bar is very high for the president to remove Powell "for cause" as the law appears to require, provided Powell decides to fight the dismissal in court.

Immediately after Powell's comments stocks began surging.

Currently, the USA inflation rate remains below what the Fed considers an optimal 2 percent level, meaning there is still space for economic expansion and workers are just beginning to benefit from the growth.

"Particularly with the muted inflation readings that we've seen coming in, we will be patient as we watch to see how the economy evolves", he told the American Economic Association, adding that the Fed is not on a preset path of tightening policy and suggesting it could pause rate hikes as it did in 2016.

On Friday, the Labor Department reported the United States added 312,000 jobs in December, much above analyst expectations.

At the same time, he reassured investors of the Fed's flexibility. Since then, the Federal Reserve chairman has received several reasons to temper his assessment. The market bounce came after a volatile December selloff in which traders grew increasingly skeptical of the Fed's upbeat forecasts and plans to keep hiking interest rates in 2019.

Here's a run-down of the data that have - and haven't - changed since the Fed chief briefed the media on December 19 after policy makers raised rates and signaled two more hikes in 2019.

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The President has repeatedly criticized the Fed's increasing monetary restrictions and interest rates, which he blamed for the market drop in a phone call with Fox News host Shannon Bream in October.

For their part, investors see the next move being a cut, according to pricing in interest rate futures contracts.

"The problem in my opinion is Treasury and the Fed", Trump said. He also pledged to stay in his post even if asked to quit by President Donald Trump, who has repeatedly chastised the man he put in the job over the Fed's repeated rate hikes. Data released earlier on Friday showed U.S. employers added the most workers in 10 months as wage gains accelerated.

Asked if any future meeting with Trump was scheduled, Powell said, "I have no news on that". Yet signs are growing that Trump's tit-for-tat trade war with China is taking a toll: this week, tech giant Apple and grains trader Cargill warned about weaker sales in China. A third Fed president, Thomas Barkin of Richmond, said he is hearing more concerns about economic risks and trade.

"It's hard to square recession worries with the strongest job growth we've seen in years", said Alec Young, managing director of global markets research for FTSE Russell.

Speaking after months of volatility in world bond and stock markets, Powell avoided some of the communication missteps that in the past have roiled rather than calmed investors. But it has been gradually reversing that stance over the past year, although the balance sheet still remains above $4 trillion.

"When you get such a strong jobs report and a Fed chairman saying he's patient and flexible it sends a message to the markets that we're moving in the right direction", said Robert Pavlik, chief investment strategist, senior portfolio manager at SlateStone Wealth.

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