The Fed cut rates by a quarter-point on Thursday, as expected.

I don’t think there was a data-based case for moving so quickly after September’s half-point cut, but 25bps points isn’t going to make a difference either way, so no harm no foul, I guess.

The statement was anodyne, but there were a couple of notable tweaks. The Committee changed its assessment of the labor market to say conditions have “generally eased.” In September, they were more emphatic — the last statement declared that job gains had “slowed.” A few weeks later, the BLS said the opposite. “Generally eased” gives the Committee some leeway to obfuscate.

The simple figure’s just a placeholder, but it’s also a requiem for the most aggressive hiking cycle since Volcker.

The Committee also dropped the language around having “gained greater confidence that inflation is moving sustainably” to 2%. I don’t think that omission suggests the Fed’s any less confident now than they were in September. Rather, that wording was a callback to the language the Fed used to justify holding terminal, so now that cuts have begun, it’s superfluous.

By dropping that language, the Fed’s effectively simplifying things. Now, that paragraph — the second paragraph in the statement — essentially just says the Committee views the risks around its dual mandate as roughly balanced, and the wording of the sentence announcing the actual rate cut reflected the same subtle shift, jettisoning an explicit reference to inflation progress in favor of a more general reference to the Fed’s “goals.”

I suppose the idea is to convey a sense of normalcy: The fact that they don’t have to speak directly to inflation other than to say it’s “somewhat elevated” is perhaps a way to suggest the crisis has passed. But that feels a bit like ignoring the elephant in the room. This isn’t over yet, and given the prospective impact of the incoming administration’s economic policies on inflation outcomes, the Fed needs to be vigilant.

Of course, Powell’s now staring down another 18 months of what’s very likely to be public derision emanating from Donald Trump, who’s made no secret of his displeasure with the man he chose to run the Fed. Some readers will recognize the next several passages from the October 12 Weekly. I think they’re well worth reprinting in light of the election result.

America’s going to run out of luck eventually by countenancing the Trump circus. One point of failure could very well be the central bank, and specifically the Fed’s (nominal) independence.

Exactly no one thinks the Fed’s completely apolitical. But to make a show of politicizing US monetary policy by, for example, requiring the Fed to consult the White House on rate decisions (as The Wall Street Journal suggested Trump might endeavor somehow to require), could be extraordinarily disruptive.

Last month, hedge fund manager Scott Bessent — one of Trump’s top economic advisors — said the Fed damaged “the integrity of the institution” by cutting rates in September. Among Bessent’s ideas for Trump: Establish a “shadow Fed chair” by choosing and announcing Powell’s successor long before the end of his term. As former Dallas Fed researcher Marc Giannoni put it in remarks cited by Bloomberg, such an effort could “creat[e] noise about who is in control [and] might be enough to create turbulence in markets.”

“Might” is generous. It would create turbulence in markets. Can you imagine the confusion that’d play out across the US rates complex in a situation where the Fed made a move under Powell that a “shadow Fed chair” hand-picked by Trump publicly opposed? How do you price a rates trajectory (i.e., the dot plot) when a Fed chair in-waiting promises publicly to reverse whatever path the current Fed chair’s on? I could conjure any number of terrifyingly vexing variants of that question.

In the same linked article, Bloomberg quoted Bessent. Trump, he said, “understands that central bank independence anchors long-term inflation expectations, which anchors long-term rates.” The implication: Trump wouldn’t overstep, let alone try to commandeer US monetary policy à la Recep Tayyip Erdogan in Turkey.

Color me skeptical about Bessent’s assurances. In November of 2018, a month before he reportedly pressured Steve Mnuchin to figure out a way to demote Powell, Trump explained how he knew the Fed wasn’t acting in the best interests of the country. “I have a gut,” he told the Washington Post. “And my gut tells me more sometimes than anybody else’s brain can ever tell me.”