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The five remaining candidates for Federal Reserve chair have all recently advocated for much lower interest rates — but key members of the congressional committee that will consider the nomination say that won’t change much for the central bank.
“I don’t think [their leadership] is going to move the needle; particularly now with the uncertainty around employment numbers [during the shutdown], I think they’re going to maintain a conservative posture,” Sen. Thom Tillis, R-N.C., told Semafor. “I can’t imagine there’s going to be a precipitous decline from 25 basis points” once they’re confirmed.
Sen. Mike Rounds, R-S.D., pointed out that the chair will be just one of a dozen votes on monetary policy and that investors may also play a role in constraining them: “The markets will tell us whether or not the choice that is made is viewed by the market as being the right choice.”
“I don’t think the president will pick a bad choice,” Rounds added. “It’s just a matter of whether or not the person coming in will understand how critical it is that they be consistently perceived as being independent of the White House.”
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President Donald Trump has repeatedly pressured the central bank to cut interest rates as he seeks to make housing more affordable. That’s unsettled lawmakers on both sides of the aisle, who say it must remain free of political influence to avoid rampant inflation.
“What you should not do is simply lower interest rates — or increase interest rates — because the president tells you to,” Sen. Chris Van Hollen, D-Md., said. “I worry a lot about a nominee who’s simply a rubber stamp.”
After the Fed lowered interest rates a second time Wednesday, current Federal Reserve Chairman Jerome Powell told reporters a third cut is “not a foregone conclusion” while policymakers grapple with conflicting economic indicators. Still, Trump’s allies say warnings of stagflation — when high inflation collides with high unemployment — are overblown.
“You should be concerned about anything like that,” Sen. Bill Hagerty, R-Tenn., told Semafor. “When you hear the noise in the media, though, I think it fails to take into account the significant investment that has already been committed that is coming to America. I think it fails to take into account what I see as a very strong underpinning in terms of consumer spending and demand.”