First Fed Meeting Under New Chair Jerome Powell

by: The Knowledge Group

March 28, 2018


The release and removal of Janet Yellen as the Fed Chairwoman by President Trump surprised no one. Just about anything having to do with the prior administration has been systematically removed by Trump and his team to seemingly to insure there is no remnant of the previous influence, with Trump’s administration wanting to start on a new page. So, the new Fed Chair, Jerome Powell, was only a surprise in how long it took to occur. Many believe that Powell is not very different from his predecessor and will carry a number of the same policies forward. This is just educated guessing, however, and there is nothing that holds Powell in figurative cement on the same path.

Everyone expects that rates are going to finally rise. Fed-lending to banks has been sitting at historic lows for so long, one would think that the days of double digit interest rates will never come back again. However, every market watcher is in agreement that the Fed under its new direction will be looking to slow the fast movement of money creation a bit. The question is not that there will be an increase but by how much.

If Powell goes against expectations and maintains a flat rate position with no rate increase, then the cost of money would stay cheap, but the market would go off kilter. It will be a surprise, throwing a bucket of uncertainty all over the place, and the Dow would likely go into very serious correction territory.

On the other hand, a 25 basis point hike would be right in line, give folks the impression the market is in order and the Fed agrees, and the market would likely rise further as a result.

In the odd chance that Powell and Fed Company decide to be aggressive and raise the rates 50 basis points instead, this too would be a shock. It could also start a panic making people think the Feds see serious inflation on the near horizon and are acting quick before it arrives. Markets would not be pleased and everyone might hunker down for an inevitable downturn.

Thus, unlike President Trump, Chairman Powell’s words may not be greeted with the same caution and cynicism, as we have seem from some corners of Washington D.C. You can stay updated with the latest trends and developments whilst earning CLE credits with our extensive library of live and recorded webcasts, feel free to browse by clicking here.