The central bank cut interest rates at its meeting yesterday in response to cooling inflation, but the real action came at the press conference after the meeting.

Federal Reserve Chair Jerome Powell has been under pressure before, but the events of this week might have him sweating through his crisp collared shirts. The central bank cut interest rates at its meeting yesterday by a quarter point, to a range of 4.5%–4.75%, in response to cooling inflation. But the real action came at the press conference after the meeting.

Powell replied to reporters’ questions about his future amid speculation that President-elect Trump might try to sack him, saying the president does not have the power to fire or demote him. “Not permitted under the law,” Powell said. He also remained expectedly noncommittal about the Fed’s plans for more rate cuts.

Business as usual? Economists predicted this cut would kick off a season of cuts, one in December and more in 2025. But those plans were thrown into flux after the election, as investors now predict that Trump’s proposed policy plans—namely tax cuts, tariffs, and deportations—may increase the inflation that Powell and his team managed to tame.

The White House is not the Fed

Trump and the Fed didn’t have a starry-eyed relationship in Trump’s last term—he called Powell, whom he appointed, an “enemy” and criticized the agency for not cutting rates. Financial policymakers typically view elections as data points but don’t allow the outcome to impact their decisions.

What the president can’t do: Bring down rates. Interest rates are set by the Fed, which was granted independence from Congress in 1951 so that central bankers could make hard decisions for the long-term health of the economy, even if it hurts politicians by frustrating consumers.

What the president can do: Appoint new people to lead the agency. Powell’s term ends in May 2026, at which point Trump will likely select someone else to take charge. (The Fed Chair needs Senate approval.)

Zoom out: The Fed is independent for a reason.The last time a president got too involved, it was Richard Nixon, and economists blame his insistence on keeping rates low for the Great Inflation of the 1970s.—CC

By Cassandra Cassidy November 8, 2024

Illustration: Anna Kim, Photos: Brendan Smialowski, Anna Moneymaker/Getty Images