Investors who bet on the close-term dip in interest rates can make the political theater wrong for the monetary policy reality. Federal Reserve Chairman Jerome Powell has been speculated in bonds and futures markets by President Donald Trump’s renewed pressure. But history – and Powell’s own posture – suggests that such expectations are wrong. The previous conflicts between the presidents and the fed chairs rarely produce immediate policy changes. Lesson: Bet at the dramatic rate, sound more relaxed on wishing thinking than economic logic.
Trump’s diversity morality can attack investors as unconventional. He said, “I call her in every name in the book, trying to do something.” But history provides many educational examples of how the presidents have tried – and mostly failed – to bold the chairs fed.
In 1965, for example, President Lyndon Johnson had a harsh word for William McCeni Martin, who had just pushed through a rate growth: “You’ve found me in a situation where you can run a rapier for me and you have done it. You have taken advantage of me and I just want to know that you are a disappointing thing.” Johnson feared that high rates would reduce their domestic expenses programs and their growth of Vietnam war. Nevertheless, despite the pressure, Martin stood firm – and did not reversed the rate of rate – it shows how intensive president’s demands often fail to move the fed.
Why Powell will not play politics
So far, Powell has erected his ground in front of the President’s oral attacks. “Everyone who knows me,” he said, “a meaningful increase in inflation in the coming months from tariff is estimated because someone has to pay for tariffs.” There are two important reasons to doubt that Powell will soon replace the tracks on interest rate management.
For one thing, he has very little to achieve and he is very low to wander from the trend that he believes that the current economic figures are best supported. Nothing states that Powell Federal Reserve consider the chairmanship as a step for the higher office and hence it can be motivated to play politics.
Two predecessors of Powell – G. William Miller and Janet Yellen – served as the Secretary of the Treasury after leading the Federal Reserve. But their ways provide very few reasons to believe that Powell will see that role as a possible reward. Miller was appointed to both positions by the same President Jimmy Carter, so his move was not the result of cross-party political calculations. Meanwhile, the Yeleon was initially appointed by the Fed Chair by Barack Obama, then passed by Trump for re -appointment, and later tapped for the Treasury role by the President who Biden -Obama’s former vice -president.
On the contrary, Powell himself was appointed to lead the Fed by Trump, but has since faced the dangers of public criticism and even the dismissal from the former President. While Trump has shown a desire to include former rivals in his cabinet, it is difficult to imagine Pavel to earn such side. Best of all, he can expect that Trump avoids trying to set him on fire before his tenure in 2026 – a step of suspected validity.
In that light, we can assume that Powells are concerned with the safety of their heritage. He probably does not want to remember, as Arthur Burns is depressed, to present for political pressure and has failed to keep a lid on inflation. The misguided monetary policy also tarnished the prestige of Eugene Mayor. His later successor Ben Bernanke concluded with economists Milton Freedman and Anna Schwartz that the Fed’s contraction policy helped to change the economic recession that began in 1929 during the tenure of the mayor.
A vote limit
Another argument against betting on an impending interest rate plmets is that even though Trump’s strategy is improperly successful in changing Powell’s mind, they will change only one of the 12 votes on the federal open market committee. The decision of FOMC was unanimous to leave the target Fed fund rate from 4.25% to 4.50% at a meeting from 17 to 18 June. In addition, seven out of 19 officers who are eligible for 12 voting posts, have predicted that there will be no rate cut for the remaining 2025, which is above four in March.
History suggests that the fed will not fold
Certainly, you can say, if he had changed its position at rates, then FOMC never goes against its chair? If this were so, it would not have been unprecedented. In June 1978, Miller was in minority as the full FOMC voted to raise rates.
Federal Reserve officials can be investors about the expectations of sufficient fall in interest rates in the near future from recent statements by Christopher Waller and Mitchell Boman. He said that Fed may soon start reducing interest rates as July. Note, however, Waller specifically rejected an immediate, sharp rate reduction, instead stating that FOMC should “start slow.”
Powell also rejected Trump’s declared argument to demand a decrease in interest rates, correctly indicating that “ensuring” cheap financing for the US government “is not part of the Fed’s legislative mandate.
Following the comments of Waller and Boman, Powell confirmed his previous stance, stating to the House Financial Services Committee, “For some time, we are well deployed to learn more about the possible course of the economy before considering any adjustment of our policy.”
The futures market estimate of the possibility of cutting a quarterly-point rate at the FOMC meeting on 30 July increased by 8% just before Waller’s comment until 27 June. Nevertheless, the kind of standing, immediate rate cuts, Trump remains a longshot.
Hope is not a strategy
In summary, character -related approach to Geom Powell’s monetary policy, their current stance on interest rates, and fed chair as a fed chair, to focus on their possibility on their possibility during their final year, is very few reasons to expect the President’s pressure – although tremendous – to indicate a dramatic pivot. It may seem to be attractive as a large market payday, a sharp, close-term rate cutting rates more relaxed on hope analysis based on sound analysis.