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Powell says he’s not worried about the Fed losing its independence under Trump

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Jerome Powell, chairman of the US Federal Reserve, right, speaks during the New York Times DealBook Summit at Jazz at Lincoln Center in New York, US, on Wednesday, Dec. 4, 2024. 

Yuki Iwamura | Bloomberg | Getty Images

NEW YORK — Federal Reserve Chair Jerome Powell said Wednesday he isn’t worried that President-elect Donald Trump will try to politicize the central bank once he takes office in January.

The question of Fed independence has come up over the past several months, amid reports that Trump may try to pull strings on monetary policy both by legislation and possibly by installing a “shadow chair” who could undermine Powell’s authority.

However, Powell said there are safeguards in the congressional legislation that created the Fed that will help preserve it from political influences.

“What does independent mean? It means we can make our decisions without them being reversed,” he told CNBC’s Andrew Ross Sorkin during an on-stage interview at the DealBook Summit.

“That gives us the ability to make these decisions for the benefit of all Americans at all times, not for any particular political party or political outcome,” he added. “We’re supposed to achieve maximum employment and price stability for the benefit of all Americans and keep it out of the politics completely.”

During his first stint in office, Trump hurled sharp criticism at the Fed and Powell, whom he nominated. In the months leading up to this year’s election, Trump advocated for allowing the president a say when the the central bank is making decisions on interest rates.

Though many presidents have tried to exert influence over the Fed, Trump was the most public about it. Still, Powell said he believes there’s strong support in Congress to keep the Fed’s decision-making apart from the political swirl in Washington.

“I think there is very, very broad support for that set of ideas in Congress in both political parties on both sides of the Hill, and that’s what really matters,” he said. “It’s the law of the land, and I’m not concerned that there’s some risk that we would lose our statutory independence.”

Powell provided no clues as to which way he’s leaning on the near-term path for interest rates, though he did note that the Fed can afford to be cautious. As he has said before, Powell said the U.S. economy is “the envy of other large economies around the world.”

The Fed’s next rate decision comes in two weeks. Markets are placing about a 75% probability that the Federal Open Market Committee will cut its key borrowing rate by a quarter percentage point.

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ALL, WBA, DAL, WBD and more

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January 10, 2025

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If you are 60 years old, new 401(k) rules could save you money

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24 hours ago

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January 10, 2025

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Stock Trader’s Almanac editor-in-chief Jeffrey Hirsch gives his 2025 expectations for the stock market on ‘Making Money.’ 

They say you get better as you get older. This might just be true for 401(k) plans in 2025 for those striding into their golden years. Planning for retirement just got a significant boost for Americans aged 60 to 63, thanks to provisions in the SECURE Act 2.0.  

Beginning in 2025, individuals in this age group will be eligible for something called a “super catch-up” contribution limit for employer-sponsored retirement plans, including 401(k)s. This exciting change, recently clarified by the IRS, provides a unique opportunity to accelerate your retirement savings during those crucial pre-retirement years. 

The basics: Catch-up contributions 

Catch-up contributions allow individuals aged 50 and older to save extra money for retirement beyond the standard contribution limits. For 2024, the catch-up contribution limit was $7,500, on top of the $22,500 annual contribution cap for 401(k)s and similar plans. These additional contributions are designed to help older workers close any retirement savings gaps they may have accumulated over the years. 

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Introducing the super catch-up 

Under the SECURE Act 2.0, individuals aged 60, 61, 62, and 63 can contribute even more to their retirement accounts starting in 2025. The new “super catch-up” limit will be the greater of $10,000 or 150% of the regular catch-up contribution limit for the given year, adjusted annually for inflation. At 64, you go to the regular catch-up. 

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401(k)s just got a little better for those who are aged 60-63, thanks to new catch-up provisions. (Reuters)

For example, if the regular catch-up contribution in 2025 remains at $7,500, the super catch-up limit would increase to $11,250 (150% of $7,500). If the $10,000 floor is adjusted for inflation, it could rise even higher, allowing individuals to add substantially more to their retirement savings. 

Why is this important? 

This enhancement comes at a pivotal time for many individuals. Those in their early 60s often find themselves at the peak of their earning potential, with more disposable income available for saving. At the same time, they are rapidly approaching retirement and may feel pressure to bolster their nest eggs. The super catch-up offers a golden opportunity to bridge any shortfalls and strengthen their financial security. 

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Additionally, this provision aligns with the reality that many Americans are living longer. Increasing retirement savings can help ensure a more comfortable and secure retirement in the face of rising healthcare costs, inflation, and other financial challenges. 

Key considerations 

To take full advantage of the super catch-up, it’s essential to plan strategically: 

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  1. Evaluate Your Budget: Ensure you have the financial flexibility to maximize contributions. Cutting unnecessary expenses or reallocating resources may be necessary.
  2. Consult a Financial Advisor: Professional guidance can help optimize your savings strategy, factoring in tax implications and long-term goals. One good place to start is at Exit Wealth to learn more about this technique.
  3. Understand Tax Implications: Contributions to traditional 401(k)s are tax-deferred, reducing your taxable income now but subject to taxes during retirement withdrawals. Consider how this fits into your overall tax strategy and whether the regular 401(k) or the Roth 401(k) make more sense for your situation.
  4. Stay Informed: Keep an eye on annual IRS updates regarding contribution limits and inflation adjustments.

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The super catch-up offers a golden opportunity to bridge any shortfalls and strengthen their financial security. 

A new era of retirement savings 

The super catch-up contribution is a testament to the growing focus on enhancing retirement readiness for Americans. By leveraging this opportunity, individuals aged 60 to 63 can significantly boost their retirement savings, potentially lower their overall tax liability, and provide greater peace of mind as they transition into their golden years. 

If you’re approaching this age bracket, now is the time to review your retirement strategy and prepare to make the most of this exciting new provision. Retirement is a journey, and with the super catch-up, you can ensure yours is as secure and fulfilling as possible. 

Ted Jenkin is president of Exit Stage Left Advisors and partner at Exit Wealth.

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Insurance stocks sell off sharply as potential losses tied to LA wildfires increase

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1 day ago

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January 10, 2025

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In this aerial view taken from a helicopter, the Kenneth fire (below) approaches homes while the back side of the Palisade fire (above) continues to burn Los Angeles county, California on January 9, 2025. 

Josh Edelson | Afp | Getty Images

Insurers exposed to the California homeowners’ market sold off sharply Friday as the devastation caused by the Los Angeles wildfires spread.

Shares of Allstate and Chubb both declined 4% in morning trading, while AIG and Travelers fell about 2% each. These four stocks were among the biggest losers in the S&P 500 Friday morning.

AllState, Chubb and Travelers are the most exposed carriers to insured losses in the wildfires, according to JPMorgan. The Wall Street firm noted that Chubb could have a particularly high exposure due to its high-net-worth focus in the region.

Shares of insurers drop Friday

The destructive fires this week could become the most costly in California history. The insured losses from this week’s fires may exceed $20 billion, and the estimate could be even higher if fires spread, the JPMorgan estimated Thursday. Those losses would far surpass the $12.5 billion in insured damages from the 2018 Camp Fire, which was the costliest blaze in the nation’s history, according to data from Aon.

Moody’s Ratings expected insured losses to run well into billions of dollars given the area’s high values of homes and businesses in the affected areas.

The Palisades Fire is the largest of the five blazes. It has burned more than 17,000 acres, destroying over 1,000 structures, according to California authorities. Pacific Palisades is an affluent area where the median home price is more than $3 million, according to JPMorgan.

Insurance companies have asked Southern California Edison to preserve evidence related to the devastating wildfires that have swept Los Angeles, according to a company filing to regulators.

Certain reinsurers were also affected. Arch Capital Group and RenaissanceRe Holdings declined 2% and 1.5% Friday, respectively. JPMorgan believes that rising loss estimates increase the likelihood of reinsurance attachments at various insurers being breached.

— CNBC’s Spencer Kimball contributed reporting.

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