RPT-ROI-Powell's silence on Fed controversies speaks volumes: McGeever

Despite repeated protestations from administration officials, including the president, ⁠the new Fed chair will be seen by many as a Trump surrogate, someone there to serve the president's wishes and champion the cause of lower interest rates. Powell did open up a bit on this front yesterday when asked what advice, if any, he would give to his ⁠successor.

Given the host of debates currently swirling around the Federal Reserve, Chair Jerome Powell's press conference on Wednesday was remarkable for being so decidedly unremarkable. After the central ‌bank announced it was leaving interest rates on hold as expected, Powell fielded the usual run of questions on jobs, inflation and the economic outlook, indicating that the Fed is now in pause mode.

Yet what was most interesting was what he didn't say when probed on the red-hot-button issues around Fed independence - issues that ⁠threaten to undermine investors' faith in the central bank. Perhaps irrevocably. His answers to questions on these issues – and whether he intends to stay on as governor once his term as Fed chair ends in May – were variations on the "no comment" theme: "I have nothing for you on that today," "Once again, I really have nothing for you on that today either," and "Again ... it's not something I'm going to be getting into today. Thank you."

The chuckles of resignation that ​rippled through the room - and a smirk from Powell himself - belied the seriousness of what's at stake: the Fed's very existence as an independent institution, free of political pressure and partisan bias. And this is not ‍just an academic matter; uncertainty about Fed independence is already having market implications. It's feeding into the dollar's slump, the return of "Sell America" talk, the rise in long-term bond yields, and a renewed increase in the "term premium" on Treasuries toward multi-year highs.

Of course, Powell was never likely to expand on his video response earlier this month to the Trump administration's threat to indict him, opine on the legal push to fire Fed Governor Lisa Cook, respond to criticism from Treasury Secretary Scott Bessent for attending the Cook hearing, or reveal ⁠his post-May plans. Powell ‌did reaffirm his support for independent policymaking, and expressed confidence ⁠that it will continue. "We haven't lost it, and I don't believe we will," he said.

Yet in this particular forum, Powell could not say much beyond that due both to protocol and legal concerns, which leaves a communications void on issues of such ‍gravity. And that speaks volumes about the unusual place the Fed finds itself. ANOTHER 'RUPTURE'

Last week in Davos, Canadian Prime Minister Mark Carney spoke of a "rupture" in the world order that has held for the past 80 years, the main cause of which ​is Washington's new direction under President Donald Trump. The same could be said for the 113-year-old Fed. Trump will soon announce his choice for Powell's replacement. Despite repeated protestations from administration officials, including the president, ⁠the new Fed chair will be seen by many as a Trump surrogate, someone there to serve the president's wishes and champion the cause of lower interest rates.

Powell did open up a bit on this front yesterday when asked what advice, if any, he would give to his ⁠successor. "Stay out of elected politics. Don't get pulled into elected politics. Don't do it," he told reporters. "Our window into democratic accountability is Congress. If you want democratic legitimacy, you earn it by your interactions with our elected overseers."

Trump has said he will name his pick by the end of January. Now that the president has indicated that he will keep the former frontrunner, White House economic adviser Kevin Hassett, in his current position, ⁠the short list seems to have narrowed to three: Fed Governor Christopher Waller, former Fed Governor Kevin Warsh, and BlackRock bond fund chief Rick Rieder. All three favor lowering interest rates. Rieder is the current favorite, ⁠according to betting site Polymarket, but the lead he established ‌a week ago – seemingly out of nowhere – is dwindling.

So too, many might fear, is the Fed's independence. (The opinions expressed here are those of the author, a columnist for Reuters)

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(By Jamie McGeever; Editing by Marguerita Choy)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)