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A Long Week For Jay Powell
This'll be a long week for Jerome Powell.
The Fed convenes Tuesday and Wednesday, and Donald Trump
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The most dangerous thing that can happen for Trump is that a recession begins in the fall just when he’s trying to gin up support for the MAGA team in the mid-terms. His tiny brain can only equate the idea relating interest rates to GDP. It’s too late. Interest rates have already done what they could.
Trump and Fed are in a public relations battle. Trump wants public to blame Fed for what he will cause (inflation, recession) and for what current and prior Congresses (sp?) caused (deficit). Fed wants to avoid being the fall guy and thus protect its independence.
The public hears Fed’s side through media. Media is turning negative on Trump – either because he’s hurting their audience or because it gets clicks. If Fed – Powell and other FOMC – gives media content, media will run with it.
Trump is scared of firing Powell. He knows that will be difficult to make stick, will tank markets, and that Fed’s approval rating is higher than his. The closer to midterms, the more scared he’ll be – less time to recover.
Powell should know that US won’t reach 2% inflation with full employment in his term – indeed, we might be as close now as we’re going to be for some time. The closer to midterms, the less Powell should care about being fired.