Dow wraps up worst losing streak since 1974 after hawkish Fed cut
The Dow Jones Industrial Average opened higher but closed lower for a 10th consecutive trading session, and the S&P 500 and the Nasdaq Composite gave up early gains, too, as markets processed what could be the Federal Reserve's last rate cut for the discountable future.
At the close, the Dow, on its longest losing streak since September 1974, was down 2.6% to 42,236. The S&P 500 declined 2.9.% to 5,872, while the Nasdaq fell 3.6.% to 19,392.
The 2-year Treasury yield jumped 11.6 basis points at 4.357% and the 10-year Treasury yield surged 12.7 basis points to 4.512%.
- David Dittman
Read more: Stock Market Today: Dow Dives 1,123 Points After Fed
Stocks are tanking and yields are spiking post-Fed
The stock market took a decisive turn lower during Powell's press conference. With a little under 20 minutes left in today's session, the Dow is down 1.3%, the S&P 500 is off 1.7% and the Nasdaq has cratered 2.3%.
Meanwhile, the 2-year Treasury yield has spiked 10.7 basis points to 4.348% and the 10-year Treasury yield is up 11.3 basis points to 4.498%.
"This is what happens when wishful thinking is replaced by hard reality," says Kiplinger's David Payne.
- Karee Venema
Will inflation ever hit the Fed's 2% target?
Asked if the Fed has lost conviction that it will eventually get inflation down to its 2% target, Powell emphasized that is not the case. Getting to 2% will be a gradual process, and he would not rule out the possibility of raising interest rates next year if needed to combat any potential jump in inflation, though he said he thinks that is unlikely to be needed.
But his overall message was the Fed remains committed to getting inflation back down to 2%. It's just taking longer than pretty much everyone would like. That no doubt includes Powell himself.
- David Payne
The Fed will remain data-dependent, Powell says
Pressed for some clarity on where interest rates are going and nervousness in financial markets about the uncertainty of how much the Fed will cut and how fast, Powell emphasized that the central bank can only act based on data as it comes in.
The cuts the Fed has already enacted should help the economy stay in good shape, but there's just no way to be specific about how much lower rates will go.
- Jim Patterson
Powell thinks the economy is in a good place, but is cautious on the labor market
"I feel very good about where the economy is ... we're in a really good place, our policy is in a really good place," Powell said. But he has also cited the importance of the labor market 15 times or more, often noting that it has slowed and the Fed does not want it to slow further in order to lower inflation.
- David Payne
Are financial conditions too loose?
Asked whether the gains in the stock market and other financial assets this year make the Fed concerned that overall financial conditions are too loose, Powell demurred, pointing to the signs of cooling in the broader economy, such as slower job creation.
And asked further whether he sees any value in the federal government creating a strategic reserve to hold bitcoin, Powell simply noted that the Fed is not legally allowed to hold cryptocurrencies. The subtext seemed to be that the Fed is not basing policy on the ups and downs of the markets. They are laser-focused on inflation and the labor market, and trying to keep them in a healthy place.
- Jim Patterson
Jim is the managing editor of The Kiplinger Letter and The Kiplinger Tax Letter. He joined The Kiplinger Letter in December 2010, covering energy and commodities markets, autos, environment and sports business, and previously covered federal grant funding and congressional appropriations for Thompson Publishing Group.
Powell isn't worried about a short-term increase in inflation
Powell is not going to panic about a pickup in expected inflation this year. He's still confident in the overall story that inflation is coming down. He emphasized the cooling of the labor market.
The U.S. is still unwinding from large price shocks over the past few years that drove inflation painfully high. Those were big shocks, but they won't be persistent. That echoes earlier arguments that the inflation spike was temporary and wouldn't become entrenched over the long term.
- David Payne
Why would the Fed cut rates at all next year?
Pressured to explain why the Fed expects to cut interest rates further when it is not expecting inflation to come down all the way to its 2% target next year, Chair Powell emphasized that the important thing is to see progress on lowering inflation, not to get all the way to its ultimate 2% goal.
Meanwhile, there is a great deal of uncertainty in the economic outlook, including the possibility of new tariffs imposed by the incoming Trump administration. In that environment, with the possibility of consumer prices on some imported goods rising, maybe the Fed would view any downward progress on overall inflation as a win that justifies cutting interest rates a bit.
- David Payne
The federal funds rate is close to neutral, Powell says
"We are closer to the neutral rate," Powell said, referring to the theoretical Fed Funds rate that neither slows the economy nor helps it to grow.
Whatever that balanced level of interest rates is, Powell seems to think that it won't take many more rate cuts to reach it. Economic growth is holding up, and inflation has run higher than the Fed wanted or expected.
Any further interest rate cuts will require seeing progress on lowering inflation, without letting the economy slow too much to jeopardize the labor market. Sounds like Powell is laying the groundwork for slowing rate cuts next year. It's as close to a promise as he is going to go.
- David Payne
Powell explains the Fed's cautious stance
Chair Powell explained that the Fed expects to cut interest rates slower in 2025 than it did in late 2024 because inflation, while still declining, is not declining as fast as it had expected, even as the labor market cools off. "As long as the labor market and the economy are solid, we can be cautious" in continuing to cut rates, at a slower pace.
- David Payne
Fed expects just two rate cuts next year
The Summary of Economic Projections, or dot plot, that surveys Fed officials shows only two rate cuts are expected next year, down from four in September. However, Powell has cautioned in the past against overemphasizing dot-plot shifts.
- David Payne
Related content:
Stocks swing lower after the Fed announcement
With about 10 minutes to go until Fed Chair Powell takes the mic, stocks have swung into negative territory. The Dow Jones Industrial Average is down 0.5%, the S&P 500 is off 0.6%, and the Nasdaq Composite has shed 0.6%.
- Karee Venema
The decision was not unanimous
Today's decision to cut rates by a quarter-percentage point was not unanimous. Indeed, Cleveland Fed President Beth Hammack, who began her term in August of this year, voted against the action, preferring to maintain a target range of 4.5% to 4.75%.
- Karee Venema
Here's what changed in the FOMC policy statement:
Changes to the FOMC's latest policy statement include the following:
- In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. (Previously read: In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.)
- Karee Venema
Were some folks anticipating a pause?
Given an initial rate spike in the bond market, it seems like there were a few traders who thought the Fed might not cut at all and were surprised by the decision.
- David Payne
Fed cuts interest rates by a quarter-percentage point
The Committee decided to lower the target range for the federal funds rate by a quarter-percentage point (0.25%), as expected, to a range of 4.25% to 4.5%.
According to the FOMC statement, "The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
This is fairly boilerplate language, so Powell's emphasis during the press conference will be key to how the markets interpret this.
- David Payne
David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce.
Midday market check
With about 90 minutes left until today's Fed announcement, stocks are in positive territory. At last check, the Dow Jones Industrial Average is up 0.3% led by Nvidia's (NVDA) 4% gain. The S&P 500 is 0.2% higher and the Nasdaq Composite has gained 0.2%.
Elsewhere, the 2-year Treasury yield is down 1.3 basis points at 4.228% and the 10-year Treasury yield is up 1.2 basis points at 4.397%.
- Karee Venema
What the bond market knows
Interest rate expectations are changing. You can see it in short-term movements in fed funds futures prices. You can see it in the bond market.
In fact, the bond market has been showing it for weeks.
The 10-year U.S. Treasury yield hit a 2024 peak of 4.739% on April 25 but headed lower from there as incoming data began to show inflation pressures were easing.
It bottomed at 3.618% on September 16, two days before the FOMC started the rate-cutting cycle with a double move. From there the 10-year climbed to a post-election peak of 4.463% on November 13, tracked back to 4.126% on December 6 and turned up again to where it closed on Tuesday, 4.395%.
This morning the 10-year yield is up to 4.421%.
"The new administration represents meaningful new information, and at a minimum, it creates uncertainty and a broader set of outcomes. Is a 6% 10-year Treasury yield possible? Why not?" writes Arif Husain, the chief investment officer of fixed income at T. Rowe Price, in a research note. "The transition period in US politics is an opportunity to position for increasing longer-term Treasury yields and a steeper yield curve."
The last time the 10-year U.S. Treasury yield reached 6% was in 2000.
The Fed cut by 25 bps in November and is widely expected to do so again today. But yields have trended higher since the Fed started cutting rates. Usually, bond prices rise and yields decline when the Fed is cutting rates.
Recent price action is probably due to a combination of factors: better-than-expected economic data; uncertainty around fiscal policy and tariff-driven trade policy in the second Trump administration; and how the Fed will respond to all that.
Investors would enjoy some clarity from Jerome Powell, and dot-plots will change. Best to prepare, however, for a more hawkish tone, for more dependence on incoming data… and to pay attention to the bond market.
– David Dittman
What savers should do about the Fed meeting
Rising interest rates in recent years have been helpful at least for one category of people: Savers.
High-yield savings accounts and certificates of deposit have been fruitful while interest rates were high, giving people access to high, safe rates of return. Now, though, with the Fed having begun cutting rates, what's a saver to do?
The reality is that the rates on many CDs and high-yield savings accounts are still pretty reasonable, if not as exciting as the 6+% rates seen in the last two years. But maybe it's time to lock in a CD now, before rates dip more, to secure a higher return.
Read more: The Fed Could Cut Rates Again. What Should Savers Do About CDs and High-Yield Accounts?
Economic Projections thoughts for 2025
This month's Fed meeting will include the release of the central bank's Summary of Economic Projections, or dot plot, which summarizes what each member expects monetary policy to be going forward.
In September, the FOMC projected a full percentage point of rate cuts in 2025, which, factoring in tomorrow's expected move, would bring the federal funds rate to a range of 3.25% to 3.5% at the end of next year.
However, Chris Brigati, chief investment officer at SWBC, thinks the updated guidance that is released tomorrow will "be much more hawkish, suggesting a moderation in the pace of rate cuts for 2025."
Brigati says that "while the market is pricing in four rate cuts in 2025, we expect half of that since recent inflation data has been stickier than the Fed desires. Investors are still a bit too optimistic about the number of rate cuts that they are pricing in for 2025."
- Karee Venema
With over a decade of experience writing about the stock market, Karee is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research.
Pro expectation for the December Fed meeting
And the Fed Whisperer has spoken…
As of midday Tuesday and based on 30-day fed funds futures prices, it's 95.4% certain the FOMC will cut interest rates by 25 basis points on Wednesday at 2 p.m.
But what does Nick Timiraos say? The Wall Street Journal's man at the Federal Reserve writes of a central bank "confronting another potential hinge point."
Incoming data suggest things are not how they were in September when the Fed started this round of rate-cutting with a jumbo-sized 50-basis-point move. They did so at the time because it looked like the labor market was cracking.
The Fed cut by a quarter point in November. Another 25 basis points — which would leave the target range for the federal funds rate at 4.25% to 4.50% — is baked in for this time around.
But it isn't quite that simple, according to Jon Faust, who served as a senior adviser to Fed Chair Jerome Powell from 2018 until earlier this year.
"Right now, either a cut or a hold could be justified," Faust told Timiraos. And commentary around the trajectory of the fed funds rate is probably "more important than whatever they decide about the December meeting in particular."
Powell will host a press conference following the FOMC meeting at 2:30 p.m. on Wednesday.
- David Dittman
David is the former managing editor and chief investment strategist of Utility Forecaster and the former editorial director of Investing Daily, Charles Street Research, and Weiss Ratings. A former stockbroker, David has been working in financial media for more than 20 years.
What's at stake for Jerome Powell
With the incoming administration of Donald Trump, Jerome Powell will be under a different kind of scrutiny. Over the last three years, he was under scrutiny for how he was handling the economy's post-pandemic recovery and rising inflation. Come January 20, he'll be back under the scrutiny of the president.
Despite being nominated by Trump to serve as chair in the first place, Powell faced very public criticism from the president during Trump's first term. This included threats to fire Powell from the post — prompting questions about if the president actually has the power to do so.
This time around, Trump has said he would let Powell serve out his term, which ends in 2026. Even so, it's almost certain Powell will face public scrutiny from the president again.
In the face of that, he'll also be facing scrutiny from the media and public. The Fed is supposed to be politically independent, an ethic Powell holds near and dear and maintains frequently in public commentary. The Fed is supposed to do what makes sense for the economy, regardless of what it could "mean" politically.
But that hasn't stopped people in the past from assuming and claiming that Powell's (and the Fed's) actions are politically motivated. He's sure to get questions about it during Wednesday's press conference, and I can almost guarantee his answers will be firm and mostly succinct: The Fed does what's best for the American economy.
Read more: What Does the Trump Presidency Mean for the Fed?
- Alexandra Svokos
Alexandra covered the 2016 election for Elite Daily, worked on midterm election coverage for Bustle and ABC News in 2018 and 2022, and helped manage election coverage for ABC News' website in 2020, including leading coverage on Jan. 6, 2021. While pursuing an MBA, she served as a grader for a course on Making of Economic Policy in the White House.
Stocks end mixed after Fed announcement
The Dow Jones Industrial Average ended Thursday down six-tenths of a point at 43,729, pressured by declining financial stocks. The S&P 500 added 0.7% to 5,973. The tech-heavy Nasdaq Composite rose 1.5% to 19,269.
The yield on the 10-year U.S. Treasury note declined by 9 basis points from Wednesday's close at 4.42%, settling at 4.33% after rising as high as 4.45% intraday.
- David Dittman
Read more: Stock Market Today: Stocks Pause as Investors Assess Fed Policy
Treasury yields edged lower during Powell's press conference
It will take a while to see what Wall Street made of Powell's remarks, but the early reaction appeared favorable.
Treasury yields, which have spiked since Tuesday's election, came back down a little while Powell spoke. That may indicate that traders are less concerned now that inflation could flare up again and force the Fed to backtrack on its basic plan for gradually lowering short-term interest rates. Perhaps their takeaway was If Powell isn't worrying, we won't, either.
- Jim Patterson
If you were hoping for a little DE-flation, forget about it!
Responding to the final question of his press conference, Powell said that the Fed would not consider trying to push inflation below its 2% target to compensate for the high inflation of recent years.
So, for consumers who were hoping that prices might flatten out or even drop on average to reverse some of the loss in their spending power, they will be out of luck. Powell warned that letting inflation get too low, or turn into outright deflation, creates new economic risks. 2% inflation is the Fed's target, and Chair Powell is sticking to it.
- David Payne
Powell says the current level of deficit spending is "unsustainable"
Asked if he will follow the precedent set by some of his Fed chair predecessors who criticized U.S. fiscal policy when they thought it was dangerous to the economy, Powell said yes, though he noted explicitly that he is not commenting on the incoming administration's policy proposals.
On the topic of the national debt and the federal government's deficit, he said that the present debt is not large enough relative to the size of the U.S. economy to be dangerous. But he added that the current level of deficit spending is an "unsustainable path" for the growth of the debt.
- David Payne
Powell responds to resignation question
Asked if Powell thinks he should resign, based on critical comments made by some advisers to President-elect Trump, Powell had a terse answer: "No." Asked if he thinks he is legally required to resign if the new president asks him to, he was equally succinct: "No."
- Jim Patterson
Powell says inflation could accelerate in the coming months
Powell noted that there will be "small bumps" in the path to lower inflation, and predicted that inflation readings are likely to perk up in the coming months, because price pressures at the end of 2023 were relatively low. The year-over-year comparisons will make inflation look higher in the final months of 2024.
But Powell indicated that the Fed will look past that, and he expects the monthly inflation numbers to trend lower again early in 2025. That is why the Fed decided to cut its benchmark rate today, Powell said: The overall trend on inflation is down, even if it's not a smooth path lower.
- David Payne
Powell asked about potential tax cuts
Asked about whether a tax cut next year could add to the deficit, fuel inflation and potentially affect the Fed's intentions on reducing interest rates, Powell said that he and his colleagues will wait until something actually comes out of Congress.
If and when President-elect Donald Trump enacts a new tax reform bill, the Fed will factor its effects into its interest rate decisions, he said. But for now, Powell is not worrying about the recent election.
- David Payne
Related content:
The pace and magnitude of future rate cuts will depend on data, Powell says
Powell emphasized that the Fed still plans to lower its benchmark rate. But how much and how quickly is not something he's prepared to commit to now, insisting that the Fed will respond to economic data as it comes in, and base its policy accordingly.
"The point is to find the right pace and the right destination" when lowering interest rates, he said, but he would not be pinned down by reporters asking for specifics.
- David Payne
Powell takes questions on the election
The first question Powell received was on the election. He said the election will have no near-term impact on the central bank's decisions.
"We don't know what fiscal policy changes will be. We don't guess, speculate, or assume," he added.
- David Payne
Powell sticks to script in written statement
Powell stuck to his data-dependent script while reading his written statement. He emphasized that the Fed can respond to changing conditions as needed.
That's been a mantra of his.
Now on to the questions...
- David Payne
Slight changes to the FOMC policy statement
Changes to the FOMC's latest policy statement include the following:
- Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. (Previously read: Job gains have slowed, and the unemployment rate has moved up but remains low.)
- Inflation has made progress toward the Committee's 2 percent objective but remains somewhat elevated. (Previously read: Inflation has made further progress toward the Committee's 2 percent objective but remains somewhat elevated.)
- The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. (Previously read: The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.)
- In support of its goals, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 4-1/2 to 4-3/4 percent. (Previously read: In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent.)
- Karee Venema
Bond market awaits Powell's presser
There is very little reaction in the bond market so far. It appears markets are waiting to hear a more detailed explanation from Powell during his press conference.
- David Payne
Fed cuts interest rates by a quarter-percentage point
As expected, the Federal Reserve lowered short-term interest rates by a quarter-percentage point (0.25%).
The Fed's policy-making committee cited improving inflation and moderation in the labor market as reasons for its decision. It did not reference the recent election results, indicating that the Fed plans to focus on hard data and not on expectations on where fiscal policy will go under the incoming Trump administration.
Of course, nearly every question in the 2:30 pm Eastern Time press conference will reference the election results in some way. It will be interesting to see how Fed Chair Jerome Powell chooses to handle these.
- David Payne
Related content:
- Fed Cuts Rates Again: What the Experts Are Saying
- Jobs Growth Stalls Amid Hurricanes and Strikes
- CPI Report Points to Gradual Pace for Rate Cuts
David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce.
Financial stocks are pressuring the Dow ahead of the Fed
With roughly 40 minutes to go until the Fed announcement, the stock market is mostly higher.
The Nasdaq continues to lead, up 1.3% at last check, while the S&P 500 has added 0.6%. The Dow is swinging between positive and negative territory, though, pressured by financial stocks that are giving back some of Wednesday's election-inspired gains.
JPMorgan Chase (JPM) is currently the worst Dow Jones stock today, down 4.1%, followed by American Express (AXP) and Goldman Sachs (GS).
- Karee Venema
What should homebuyers or sellers do about the Fed?
The housing market has been largely in limbo, crushed between rising home prices and rising mortgage rates. Now that the Fed is cutting rates, both prospective buyers and sellers are crossing their fingers that we’ll reach a point that will unjam the market.
Indeed, since the first rate cut in September, mortgage rates have begun falling, but the market is still fairly stale. Sellers still don’t want to leave their homes because they have good mortgage rates and don’t want to move and get a higher one, and buyers are still scared off by those high mortgage rates. Yes, they’re lower, but they’re still not as low as they’ve been in very recent memory.
Some reports put the “magic mortgage rate number” at anything below 6%. Current average mortgage rates are below 7%, but not by much. The weekly average, per Freddie Mac, for a 30-year fixed-rate mortgage is 6.79%.
If we take the prediction the Fed will make a 25 bps cut today, that’s still not going to get average mortgage rates below 6% in the immediate future.
So what’s a buyer or seller to do? In many cases, it’s a personal decision: Do you have to move? Is it the right time for you? Sometimes the answer has nothing to do with macro factors.
- Alexandra Svokos, senior digital editor, Kiplinger.com
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Questions facing the central bank
Nick Timiraos of The Wall Street Journal is as well-sourced inside the Federal Reserve as any reporter in the country. During Jerome Powell’s tenure as chairman, he’s been called the “Fed whisperer” and “Chairman Timiraos” because of his consistent track record of reporting what the Fed will do before the Fed does it.
In his article previewing today’s interest rate decision by the Federal Open Market Committee (FOMC), Timiraos identified four questions facing the central bank in the aftermath of the election of Donald Trump, the first man in more than 100 years to reclaim the White House for a second term after losing a first reelection bid.
“First,” writes Timiraos, “does the election result lead to meaningful changes for economic demand or inflation that warrant a different policy path?” According to Timiraos, the Fed will wait to see what Trump does with taxes, tariffs and immigration.
Republicans have clinched a majority in the Senate; much depends on control of the House of Representatives. “Staff economists could begin to revise some of their underlying assumptions at the December meeting” if the GOP takes the House as well.
The final three questions Timiraos identifies focus on the job market, inflation and interest rates.
Timiraos notes that since the FOMC last met, concerns about job-market deterioration remain, but “have receded somewhat.” And the impact of weather, strikes and the election “will make it harder for officials to be explicit about their coming plans.”
As for inflation, Timiraos observes that the Personal Consumption Expenditures Price Index (PCE) has been slowing and core inflation has declined since its peak in 2023 — thus why there was an interest rate cut in September. At the same time, Timiraos writes, “Some officials could agitate for a slower pace of cuts if inflation progress appears to stall and the economy is humming along.”
The last question is perhaps the simplest and most complex: “What is the right level for rates, anyway?”
The answer Timiraos provides is that “officials are trying to bring rates back to a more ‘normal’ setting.” The problem Fed officials ultimately face is “they don’t know what constitutes a normal rate.”
- David Dittman
David is the former managing editor and chief investment strategist of Utility Forecaster and the former editorial director of Investing Daily, Charles Street Research, and Weiss Ratings. A former stockbroker, David has been working in financial media for more than 20 years.
Mid-morning market update
Stocks are higher in mid-morning trading as investors look ahead to this afternoon's Fed announcement.
At last check, the Nasdaq Composite was leading its peers, up 1.1% as semiconductor stocks climb on positive earnings reactions for Arm Holdings (ARM) and Qualcomm (QCOM). The S&P 500 is 0.5% higher and the Dow Jones Industrial Average has added 0.1%.
- Karee Venema
With over a decade of experience writing about the stock market, Karee is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research.
What time is the Fed meeting announcement?
The FOMC meeting started yesterday and will complete today.
You should expect to hear an announcement from the Fed, which will indicate their decisions, at 2 p.m. ET, and Fed Chair Jerome Powell will speak at a press conference at 2:30 p.m. ET.
Stocks jump post-election, pre-Fed
"Risk appetite returned with gluttonous abandon on Wednesday," Kiplinger senior investing writer Dan Burrows says of how the stock market acted today.
The Dow jumped 1,500 points in reaction to a clear election result — remember, markets hate uncertainty. Some of the biggest wins of the day were seen in financials, with Goldman Sachs (GS) coming away as the Dow's best performer.
"Markets were so busy digesting the outcome of the election they were unable to mount the usual anxiety that precedes meetings of the Federal Open Market Committee (FOMC)," Burrows writes.
Read more here: Stock Market Today: Dow Jumps 1,500 points on Election Outcome
Could Trump impact the Fed meeting?
Despite appointing him to the Fed chair position in 2018, Donald Trump has not been Jerome Powell’s biggest cheerleader. During his first presidency, Trump regularly took to Twitter (before he got kicked off in the wake of the Jan. 6 attack and before his new pal Elon Musk took the platform over) to criticize Powell and the Fed, calling it “very weak,” as one tamer example. In fact, Trump tweeted about the Fed 100 times between nominating Powell and the beginning of 2020, according to a Yahoo Finance analysis.
By the end of 2018, Trump was already considering trying to fire Powell. Currently, no president has really tried to fire a Fed chair, and it’s an outstanding question if they have the legal authority to do so.
“The law says that the president can remove a member of the Federal Reserve's Board of Governors, which includes Jay Powell — quote — 'for cause.' And most legal scholars thinks that means the president can't do it just because he doesn't agree with the Fed chairman about policy,” Binyamin Appelbaum told PBS in 2018.
Earlier this year, Trump said he would not reappoint Powell, although in the summer, Trump said he would allow Powell to finish his term, which ends in May 2026.
Meanwhile, Powell has maintained the Fed is apolitical and driven only by what’s right for the American economy. And in any case, Trump won’t be sworn-in until January.
- Alexandra Svokos
Alexandra covered the 2016 election for Elite Daily, worked on midterm election coverage for Bustle and ABC News in 2018 and 2022, and helped manage election coverage for ABC News' website in 2020, including leading coverage on Jan. 6, 2021. While pursuing an MBA, she served as a grader for a course on Making of Economic Policy in the White House.
The Trump factor and the Fed meeting
While markets are generally expecting the Federal Reserve to reduce its benchmark interest rate by a quarter of a point, Fed Chair Jerome Powell has a new wrinkle to consider: President-elect Donald Trump, along with a Republican Senate and the possibility of a Republican-controlled House of Representatives, too.
Trump campaigned on extending and adding to his signature 2017 tax cut, and he has also talked about imposing steep tariffs on imported goods from China and Mexico. Plus, he says he will order deportations of illegal immigrants once he takes office. Whatever you think of those policies politically, they have the potential to drive up the federal budget deficit or raise costs for certain businesses and consumers, which could add to overall inflation.
Whether Powell suggests that those factors could slow the Fed's future intended interest rate cuts will be a key storyline to watch. Powell will demonstrate his commitment to hard data by cutting tomorrow and not reacting to vague fiscal policy plans. But expectations for the future path of rate cuts are definitely more uncertain now.
- Jim Patterson
Jim is the managing editor of The Kiplinger Letter and The Kiplinger Tax Letter. He joined The Kiplinger Letter in December 2010, covering energy and commodities markets, autos, environment and sports business, and previously covered federal grant funding and congressional appropriations for Thompson Publishing Group.