Author: Li Dan, Wall Street Insight
Federal Reserve Chairman Powell continues to ignore President Trump's calls for interest rate cuts. He reiterated that Trump's policies, such as tariffs, create high economic uncertainty, and the Fed will wait until the situation becomes clearer before considering rate cuts, aiming to avoid sustained inflation from tariffs.
Powell stated that the Fed will balance its inflation and employment missions, while acknowledging that if tariffs push up inflation and slow economic growth, achieving these dual missions will be challenging. This is seen as raising concerns about stagflation.
Powell anticipates that financial markets like US stocks will continue to fluctuate amid unprecedented uncertainty, but denies that the Fed will "rescue the market" like the Fed Put option investors bet on, because the market is functioning normally and orderly.
[The rest of the translation follows the same professional and accurate approach, maintaining the original meaning while translating into clear English.]Powell mentioned that the Supreme Court is hearing a case exploring whether the president has the ability to dismiss personnel from independent government agencies. He believes this case affecting government layoffs does not apply to the Federal Reserve. However, he is unsure whether it applies.
Powell stated that the Federal Reserve will continue to do its work without political influence. Regardless of political pressure, the Federal Reserve will perform its duties.
Powell claims to enjoy public service, saying it is the best job in government. Powell says that critics keep him grounded, so he doesn't feel like a god.
Reiterating that government debt will be unsustainable and needs urgent resolution
At last month's Federal Reserve monetary policy meeting, it was decided to slow down the quantitative tightening (QT) asset reduction from this month. Specifically, the monthly redemption cap for U.S. Treasury bonds will be significantly reduced from $25 billion to $5 billion.
This Wednesday, Powell reiterated that slowing the pace of QT will allow the policy to continue for a longer time. "We want this process to continue. Currently, its pace is quite slow. We believe this is a good thing. It needs to continue for a longer time."
Powell believes that using dollar swap lines during financial market volatility ultimately benefits U.S. consumers.
Powell reiterated that the U.S. federal government debt is "heading towards unsustainability" but has not yet reached an unsustainable level. He again warned about the massive deficit and debt scale of the U.S. government, stating that "this is a problem we very much need to solve," and that addressing the debt issue should not be delayed.
Powell stated, "No one truly knows how much more federal debt we can continue to add."
He also pointed out that politicians focus on discretionary spending areas—expenses outside of welfare programs like Social Security and Medicare—but this is not the real issue. In fact, discretionary spending "is already declining".
Comments suggest this statement is a mild pushback against Musk's government efficiency department (DOGE) cutting discretionary government spending.
However, Powell did not explicitly criticize DOGE. He stated that he is unclear how DOGE would implement federal spending cuts, "it is too early to draw conclusions."
Reaffirming bank capital adequacy and potential relaxation of cryptocurrency regulation
When asked about financial regulation, Powell reiterated the generally accepted view among U.S. regulators that the banking system is "well-capitalized". He stated that the banking system has considerable resilience to "various potential shocks".
Powell stated that some small and medium-sized banking institutions have a high concentration of commercial real estate (CRE) loans. "We are actively addressing" issues in the CRE sector. His personal opinion is that the U.S. should complete the implementation of Basel III.
Powell stated that non-bank credit supply "is growing very quickly" and added that this financing model locks in funds and will not experience depositor runs.
However, Powell added that private credit has not truly undergone stress testing. "We are watching closely."
Powell believes a regulatory framework for stablecoins is needed. He anticipates a relaxation of banking regulations on cryptocurrency issues.
AI is a human upgrade
Discussing artificial intelligence (AI), Powell said he initially viewed AI as a Google upgrade, "but that's not the case, it is a human upgrade."
Regarding whether AI will create more jobs than it replaces, Powell answered: "We don't know."
