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Blame Game
Jerome Powell on Tuesday blamed Donald Trump for the Fed's reluctance to cut rates in 2025.
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I sincerely hope the Fed waits until September to cut rates. By then the data will be more clear, and they can still get three cuts in if needed. Wall Street certainly does not need any boost right now.
H-Man, at Powell’s age (speaking from experience) you do care about your dignity. Tariffs as taxes, makes stuff cost more. Ultimately that will bleed down to the consumer. According to my inflation calendar that will be in the fall of this year. I think Powell knows he has plenty of breathing room until then coupled with a thick skin. Dignity will prevail.
I’m good with wait and see under the circumstances, but would love to see Powell pick Mandate Door #3 toward Fed independence (from a previous post by John L) by hiking rates a meaningless 25 bp, which is arguably consistent with sticky above target inflation and decent albeit still-wobbly employment. Of course he won’t do that, but a similarly meaningless 25 bp CUT won’t do much either for the economy, or in silencing his biggest critic. As to the latter, not even a runaway blood clot seems capable of doing that.
But what about splitting the baby? Introduce the all-new Beautiful Trump Rate Cut — 5 or 10 bp — just like the very smart Xi does in China, and also plays to Trump’s focus on the nominal number of cuts. Naming it after him should buy Powell at least as much time as anything else he is considering doing this month.