President Donald Trump has spent months attacking his own Federal Reserve Chairman Jerome Powell, accusing the former investment banker of trying to undercut him politically by raising interest rates and slowing down the economy.
On Wednesday it'll be Powell's turn to respond.
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Trump's unprecedented public pressure campaign on the Fed -- which previous presidents have purposefully left alone as a way to reassure markets that politics isn't coloring economic decision-making -- has put Powell in an awkward position.
New signs of economic softening and weeks of market volatility have shaken the broad consensus that rates must go up, but a deviation from the plan could be read as a sign of Powell caving to Trump -- and spark another wild selloff by stoking concerns that even the Fed thinks the economy is turning south.
"I think he's put the Fed in a difficult position because there's a pretty good case for not raising rates now," Nobel Prize-winning economist and New York Times columnist Paul Krugman told CNN this week, adding that not raising rates "would look like they're allowing themselves to be bullied."
In recent months, Trump has both described the Fed as his "biggest threat" for undercutting his economic agenda, while suggesting he might even consider firing Powell, whom Trump himself appointed last year. It's not clear whether Trump has the authority to fire Powell without cause.
On Tuesday, the White House again defended Trump's right to express his views, arguing it's what his supporters want from him.
"He's been very clear what his position is, while he understands that the Fed is an independent agency," White House press secretary Sarah Sanders said during a briefing. "That doesn't take away the President's right to state his opinion on a particular matter."
Yet none of those sharp criticisms appear to have deterred Powell -- or triggered a retreat from the public spotlight. On the contrary, Powell has brought "some urgency" to his job as the Fed-explainer-in-chief, calling it "essential" for the central bank to be as transparent as possible about what the central bank is doing and explaining its decisions to the American public in a way that can be easily understood.
"We are absolutely committed to serving the public in a nonpartisan, professional way, in a way that communicates what we're doing, why we're doing it, as clearly as possible," said Powell at a Dallas Fed event in November.
He has also proactively upped his visits to Capitol Hill, meeting with lawmakers and their staff to understand and address their concerns.
"I invest in all of those things," said Powell referring to his role in managing "external relations with Congress and the administration," describing it as a "very, very important part" of his job.
And starting in January, Powell will have an even bigger microphone to shield himself against the President's harsh criticisms when he begins a new tradition of holding eight press conferences a year following the Fed's policy-setting meetings.
"That will give us more opportunities to explain our actions and to answer your questions," said Powell in June when he announced the Fed's new communication strategy.
Such defensive communication will be on full display on Wednesday when Powell will be faced with explaining to reporters his wait-and-see strategy on future rate hikes next year and how he's managing to control the economy's cockpit while under direct pressure by Trump to slow down.
Jan Hatzius, chief US economist for Goldman Sachs, recently wrote in a note to clients that given the "hot-and-cold messaging" from the committee, the press conference will be particularly important.
"We expect Powell will clear the air, acknowledging some softening in the growth outlook but also highlighting data dependence," Hatzius wrote.
At its final meeting, the US central bank is expected to raise rates for the fourth time this year, lifting the federal funds rate, which controls the cost of mortgages, credit cards and other borrowing to a range of 2.5% and 2.75%. Interest rates have increased six times since Trump took office. Three of those increases have been under Powell.
The President on Tuesday morning again urged central bankers to move cautiously "before they make yet another mistake."
"Feel the market, don't just go by meaningless numbers," Trump tweeted, adding "Good luck!"
Sitting presidents dating back to Andrew Jackson have put pressure on their central bankers to keep interest rates low.
Presidents Lyndon Johnson and Richard Nixon fought with their Fed chairs. Former Fed Chairman Paul Volcker clashed with President Ronald Reagan's White House over suggestions he should lower rates to make it easier for them to raise taxes and close yawning deficits.
Even Alan Greenspan, who was first appointed to the Fed by Reagan and became the longest-serving chairman, remaining in his role into the George W. Bush administration, said in an interview with CNN's Julia Chatterley that he wore "ear muffs" while he served at the helm of the Fed for nearly 20 years, adding he couldn't recall a specific instance of anyone in Congress or an administration official telling him they wanted rates to rise.
What's unusual is the fact that Trump hasn't hesitated to unleash his fury publicly on Powell. saying he isn't even "a little bit happy" with him and calling his decision to raise rates a "mistake."
In private, people close to Trump have said, the President has sounded unnerved by signs that the economy is shakier than he likes to suggest in public, and believes he will get the blame if things turn markedly worse. Those private misgivings have come in tandem with fury at Powell, who Trump blames for the situation.
The Dow and S&P 500 are on track for the worst December since 1931, in the depths of the Great Depression. All the major averages are lower for the year, making this the first down year for stock investors in a decade. And the Russell 2000 index of small cap stocks is in an official bear market.
What's more, the Dow is 1,000 points lower than when Trump signed his tax reform into law one year ago.
In an interview on CNBC on Monday, Trump's trade adviser, Peter Navarro rested the blame on the Fed for the recent market volatility not the President's ongoing trade war with China as a determining factor.
"We have zero inflation for all practical purposes," Navarro said, adding the Fed's plan to raise interest rates while also shrinking its balance sheet was "perplexing" for some at the White House.
"The only argument I'm hearing for the Fed to raise rates now is somehow they have to exert their independence," said Navarro.
Greenspan, however, dismissed the idea that the Fed might cave to political pressure by the President.
"How do you know they are listening?" Greenspan told CNN. "I've not been aware of policy changes which were primarily driven by political considerations. The culture of the Federal Reserve System just does not allow that."
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