On Wednesday afternoon, December 5th, local time, Federal Reserve Chairman Powell shared his insights on the U.S. economy, the impact of the Trump administration, and cryptocurrencies during a public interview in Manhattan. The event, just a kilometer from the site of the "CEO assassination incident," attracted significant attention.
Powell's Career Retrospective
Powell reflected on his career transition from lawyer to Federal Reserve Chairman. He recounted his career beginnings after college and how a bold "knock-on-the-door" approach helped him connect with top investment bankers, ultimately launching his career in finance. Powell noted that he never initially anticipated joining the Federal Reserve, preferring to work in the private sector. He stated that this "knock" was pivotal in forming a relationship with future Treasury Secretary Brady, which eventually led him to public service.
While at the Treasury, Powell helped address the debt ceiling issue following the subprime mortgage crisis, gaining favor with the Obama administration and ultimately being appointed as a Federal Reserve governor.
The Trump Administration and Federal Reserve Independence
Discussing the influence of the Trump administration, Powell reaffirmed the Federal Reserve's independence. He highlighted that there is a fixed cooperation model between the Federal Reserve and government departments, particularly close relations with the Treasury. Powell also responded to Trump's mention of a "shadow Federal Reserve," stating that such a scenario is unlikely to occur. He emphasized that the Federal Reserve's independence is protected by U.S. law, and it maintains weekly communication with the Treasury.
Regarding his relationship with Trump's nominated Treasury Secretary Besent, Powell stated that he is not familiar with Besent but is confident they can work well together.
Strong U.S. Economy and Increased Policy Space for the Federal Reserve
Powell also discussed the current state of the U.S. economy, noting that it is "very good," with declining inflation and consistently low unemployment rates. He stated that the current economic conditions are stronger than anticipated in September, providing more flexibility for the Federal Reserve in future interest rate decisions.
Powell responded to questions about the September interest rate cut, stressing that the cut was primarily to signal that the Federal Reserve is ready to support the labor market. If economic data continues to weaken, the Federal Reserve will take further action.
The Relationship Between Bitcoin and the Dollar
When discussing Bitcoin, Powell remarked that Bitcoin is more akin to gold rather than a competitor to the dollar. He pointed out that Bitcoin's volatility is too high to be suitable as a means of payment or a store of value. Powell believes the relationship between Bitcoin and the dollar is more competitive with gold rather than directly replacing the dollar.
These comments coincided with the revelation of Trump's nomination of cryptocurrency supporter Paul Atkins as chairman of the U.S. Securities and Exchange Commission, which temporarily boosted Bitcoin's price. Powell stated that although the cryptocurrency sector is full of competition, Bitcoin's market performance still cannot challenge the dollar's dominance.
Overall, Powell's remarks reinforced the independence of the Federal Reserve and provided clearer guidance for future economic policies. His optimistic assessment of the U.S. economy and views on Bitcoin reflect the Federal Reserve's rational stance in facing external challenges. At the same time, Powell highlighted the complex and subtle relationship between the Federal Reserve and the Trump administration, emphasizing policy independence and the prioritization of long-term goals.
