Powell, Fed Chair, Will Likely Face Heavy Pressure From Trump

The chair of the Federal Reserve made clear he would not resign, even under pressure. But pressure from the White House is likely, market watchers say.

by · NY Times
Jay Powell, the Fed chair, with President Trump during more tranquil times in 2017.
Credit...Carlos Barria/Reuters

Powell pushes back

Jay Powell and the Fed may have pulled off the improbable soft landing in taming inflation while not crashing the economy into recession, proving many a Wall Street naysayer wrong.

But an even bigger wildcard looms in another Donald Trump presidency — what Trump 2.0 might mean for interest rates, Fed independence and the Fed chair’s own job.

That tension burst into the open at the Fed’s news conference on Thursday. The usually dry event had moments of high drama that nearly overshadowed the decision to cut the benchmark lending rate by a quarter percentage point. Powell delivered a forceful “no” when asked by Victoria Guida of Politico if he would consider resigning if Trump asked.

He delivered a more emphatic response when pressed by another reporter on whether the president had the legal authority to fire him. “Not permitted under the law,” Powell said.

Trump has made waves by saying that a president should have a say in rates policy. And suggestions have circulated from inside the president-elect’s camp that he would sideline Powell if re-elected — something Trump flirted with during his first term after appointing Powell in 2017.

The S&P 500 advanced as the news conference wore on, closing at another record, and Treasury bonds also rallied.

Trying to sideline a Fed chair before the end of the term would be unprecedented. Presidents have sparred with Fed chairs in the past over monetary policy, but experts warn that forcing one out could destabilize the markets for stocks and bonds.

Trumponomics also towers over the Fed. The president-elect’s plan for tax cuts and tariffs is expected to reignite inflation, analysts say. The question is whether that plan would force the Fed to pause cutting interest rates, or even raise them.

A slew of Wall Street economists say they believe Trump’s economic policies could push the Fed into a higher-for-longer stance. Powell said it was too soon to change course, however, noting that the Fed can’t model the effects of Trump’s policies on trade or immigration until they’re passed.

“In the near term, the election will have no effects on our policy decisions,” Powell said. “We don’t guess, we don’t speculate, and we don’t assume,” he added.

Wall Street is bracing for more tension. “President-elect Trump is likely to pressure the Fed to cut interest rates more aggressively like he did during his first term,” Bill Adams, an economist at Comerica Bank, wrote in a research note on Thursday.

“After Fed Chair Powell’s term expires in 2026,” Adams wrote, “President-elect Trump will have an opening to appoint a new Fed chair who is more sympathetic to his calls for lower interest rates.”

HERE’S WHAT’S HAPPENING

Polymarket hopes to bring its political prediction markets back to the U.S. Shayne Coplan, C.E.O. of the online betting site, said he planned to expand after his platform was lauded for accurately calling the 2024 election. (That would become easier if the Commodity Futures Trading Commission under President-elect Trump dropped its opposition to political betting.) Meanwhile, France is reportedly planning to ban the company, even as a French trader was the biggest winner of Trump-related betting on that market.

The Washington Post wants employees in the office five days a week. The mandate, which will take effect by June 2, is the latest effort by companies to require workers to be back at their desks full time. (Amazon, where The Post’s owner, Jeff Bezos, is executive chairman, announced a similar move in September.) The order was criticized by many employees, some of whom had also protested the Post’s decision not to publish a presidential endorsement.

BlackRock is said to weigh investing in Millennium Management. The asset management giant is in talks to form a partnership with Millennium, Izzy Englander’s highly profitable hedge fund, according to The Financial Times. The talks underscore BlackRock’s growing push into alternative assets, which command higher fees than the equities and bonds that the firm already dominates.

Getting ahead of Trump’s return

Donald Trump reclaimed power with a plan to — once again — reshape the global economy. The president-elect’s tough talk hasn’t always been followed by action, but countries, companies and some Republicans are girding themselves as he prepares to retake office.

China just signed off on a huge stimulus package. Lawmakers agreed on Friday to a $1.4 trillion bailout of local governments. The measures had been expected before Trump’s resounding win.

But efforts to bolster the flagging Chinese economy have taken on added importance because he has threatened to add tariffs of at least 60 percent on imports from the country.

The package fell well short of the so-called big bazooka. Some investors had hoped that Beijing would introduce a wider plan to boost consumer spending as it tried to hit its 5 percent annual growth target.

Authorities said more measures could be coming, including support for big banks and the beleaguered property sector. All eyes are now turning to the annual conference next month where economic policy is set.

Businesses are already making moves. Steven Madden, the U.S. shoe company, said on Thursday that it would cut nearly half of its Chinese production within the next 12 months. Edward Rosenfeld, the company’s C.E.O., said on an earnings call that it was a new priority. “As of yesterday morning, we are putting that plan in motion,” he said.

Companies that were hit under Trump 1.0 are feeling a sense of déjà vu. One was Komatsu, which Trump called out during his first term. The Japanese maker of construction equipment has made huge investments in the U.S., but it landed in Trump’s cross hairs again on the campaign trail when he suggested it priced American brands out of the market.

“His ire can be random,” Alicia García-Herrero, the chief economist for Asia Pacific at Natixis, told The Times.

Even some Republicans are questioning Trump’s most expensive plans. Extending his 2017 tax cuts would cost $4 trillion over a decade, according to the Congressional Budget Office, and other proposals could add trillions to the national debt. Republican strategists and lawmakers say that the party will need to show restraint.

“We can’t just have it be unlimited, whatever we want to it to be,” Senator James Lankford, a Republican of Oklahoma and member of the Finance Committee, told The Times before the election.

The latest in the White House transition

Donald Trump has made his first major appointment. The president-elect named Susie Wiles, the campaign manager who was an architect of his sweeping victory, as his chief of staff.

The choice is notable for a number of reasons. Wiles is respected throughout the Trump camp, having kept his campaign running despite his many legal troubles. She would be the first woman to hold the role, one of the most demanding — especially in a Trump administration. And it could help the transition team review more picks for other positions.

Dave McCormick is on the verge of winning a Pennsylvania Senate seat. The former C.E.O. of Bridgewater Associates, the giant hedge fund, holds a slim lead over Senator Bob Casey, the Democratic incumbent.

The Times isn’t calling the race until about 100,000 provisional ballots, including in the Philadelphia and Pittsburgh areas, are counted. But a McCormick victory would give Republicans 53 Senate seats, potentially giving Trump more leeway to nominate divisive figures such as Robert F. Kennedy Jr. to positions that require the chamber’s approval.

Trump allies on K Street are preparing to do big business. Companies and foreign governments hoping to bend the forthcoming administration’s ear are flocking to lobbyists with ties to the Trump camp.

Among the most in-demand lobbyists are Brian Ballard and Jeff Miller, who were also major fund-raisers for Trump. “The Trump people will have their day,” Ivan Adler, a lobbying recruiter, told The Times. “They’re the new ‘it’ girl.”

In other Trump news: Here’s how his victory could benefit his business empire, including real estate and crypto operations. Trump pledged to carry out the biggest mass deportation of immigrants in U.S. history. And Democratic governors, including Gavin Newsom of California and JB Pritzker of Illinois, are preparing to defend their state’s policies against Trump attacks in the courts.

Goldman lifts its velvet rope, again

For years, being named partner at Goldman Sachs meant making it to one of the highest rungs of finance. This year, 95 people, the most in years, are getting tapped for that distinction.

By the numbers:

  • It’s the biggest class Goldman has named since David Solomon became C.E.O. in 2018. In 2022 — Goldman tends to promote partners in even-numbered years — 80 executives got the nod. In 2020, 60 did, and 2018 saw 69 make the cut.
  • The 2024 class includes 26 women, the most ever, though they comprised 27 percent of the group, slightly less than in 2022. Solomon has said he wants to see more women in Goldman’s topmost ranks, a task that has gained more attention amid a notable departure of high-level women from the firm.
  • The new group had the highest percentage of Hispanic members under Solomon, at 6 percent, compared with 3 percent in 2022. Black executives represented 4 percent of the class, the lowest percentage in the past four classes. Over all, Goldman said, 2024 had the “largest number of diverse new partners in firm history.”

Being made a partner at Goldman is still lucrative. The topmost rank at the firm — a holdover from its pre-I.P.O. days when it was an actual partnership — confers an annual salary starting at about $1 million, plus the potential for hefty bonuses. More important, partners also get a cut from the profit of Goldman internal investment funds and the chance to invest in other funds without fees.

The firm has also been riding high of late, with quarterly profit up significantly thanks to strong performance in investment banking and trading.

THE SPEED READ

Deals

  • Carl Icahn’s investment firm will reportedly increase its stake in CVR Energy, one of its biggest stock holdings — but will cut its dividend again to pay for the move. (WSJ)
  • Ari Emanuel, the Hollywood superstar agent, is said to be planning deals to acquire live-entertainment assets including tennis tournaments, such as those owned by Endeavor, the company he runs. (Bloomberg)

Politics and policy

Best of the rest

  • How Gautam Adani, the Indian tycoon who beat back an activist short-seller campaign, is at the center of his country’s effort to reduce its green-energy dependence on China. (WSJ)
  • “The Haitians of Springfield, a Trump campaign target, brace for his presidency” (WaPo)

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