Chair Powell was vague, until he wasn't

The Federal Reserve's policy-setting meeting on Thursday was, of course, not the big event it typically is given the presidential election this week. The FOMC seemed fine with that, opting to fly under the radar with a well-anticipated 25 basis-point rate cut, which lowered the fed funds target range to 4.50-4.75%. The meeting's statement held few changes, and the Fed maintained the amount of the monthly reduction of its balance sheet.

During the press conference, Chair Powell reiterated the Fed's desire to move to a less restrictive policy stance given the shift in the balance of risks between its price stability and maximum employment mandates. But he softened his relentless message that the Fed makes decisions based on data, saying it would take more than a few reports to sway monetary policy. Presumably, he wanted to lessen the market's hyper focus on every data point. He also neither noted that the Fed has a timetable to reach what he termed a "plausibly neutral" level of rates nor hinted what that level might be. His description leaves policymakers with an admirable amount of latitude. We think the "terminal rate" is likely below 4%, but not as low as 3%.

Some investors and pundits have interpreted Powell's noncommittal view on the pace and magnitude of future easing as leaving the door open for a pause in December, but this might not have been his intent. In any case, fed funds futures contracts reflect a high probability for another quarter-point ease at that meeting.

Powell repeatedly declined to discuss the election outcome, with the exception of noting it will not impact monetary policy in the near term. "We don't know what the timing or substance of any policy changes will be, what the effects on the economy will be," he said. "We don't guess, we don't speculate and we don't assume."

The most enjoyable parts of the press conference were the repeated attempts by reporters to goad Powell into responding about the challenges the Trump victory may create for monetary policy, his future or even the independence of the Fed. Powell wanted no part of it, dispensing with his earlier ambiguous answers. When asked if he would resign if the president-elect asked him to, he answered with the single word "No." And when asked about his job security, he curtly reminded the reporters that a president is not permitted under law to fire, or even demote, the chair or other fed governors. For the record, Powell's tenure extends through May 15, 2026, with Vice Chair for Supervision Michael Barr's tenure running into mid-2026, as well.

Powell's "I'm not leaving" moment added levity to the press conference-and even inspired a few memes. It also, I hope, put to rest the media's obsession with this issue that is, for the time being, more smoke than fire.

If they come to pass, the president-elect's campaign promises regarding taxes, tariffs and immigration could be a cause for inflationary concern and may impact future decisions. But the Fed's desire to make policy less restrictive is intact.