Trump Agrees with Fed’s Pivot to Wait-and-See after the Fed Bows to Trump on Everything Else to Keep Monetary Policy Independent

We’ll see how long Trump’s side of this mutual understanding lasts.

By Wolf Richter for WOLF STREET.

Trump understands – since he ran on that platform and won in part based on it – that Americans hate, hate, hate inflation, that they’re tired of price increases and tired of high prices, and that this is a serious issue, not something to be brushed off by a President, and that they’re blaming Presidents for it, such as Carter and Biden. And he understands that there is one entity whose explicit job it is to fix this: The Fed. And if the Fed doesn’t fix it, that’s where the blame goes.

In an exchange with reporters on Sunday outside at night, with airstairs to a plane in the background, Trump was asked about the Fed’s decision to hold rates, instead of cutting them. He said, “I’m not surprised. I think holding the rates at this point was the right thing to do.”

The Fed has moved rate cuts, if any, into the distance because inflation has been accelerating ever so gently over the past few months, and hasn’t made any progress at all since May, with core services inflation, where most of the inflation has been, not having made any progress in 12 months, stuck just under 4%.

Powell was nominated to by Trump to head the Fed. But in 2018, the Fed’s four little rate hikes that year to ultimately 2.25%-2.5%, plus some gentle QT, attracted Trump’s ire. At the time, core PCE inflation was running at or below the Fed’s 2% target. The hikes were supposed to normalize policy rates and take the wind out of inflationary pressures, while QT was supposed to “normalize” of sorts the balance sheet. Trump keelhauled Powell publicly on a daily basis to push the Fed to end the rate hikes, which the Fed ended them in December 2018 with a final hike, and to end QT, which the Fed let peter out in mid-2019.

This time around, with inflation a real threat, the Fed has already bowed to the Trump administration’s policy priorities that don’t affect monetary policies, in an effort to avoid conflict with the White House and to maintain its monetary policy independence:

The Fed will now “review” the bank stress tests. On December 23, the Fed as banking regulator announced that, “in view of the evolving legal landscape,” it would “soon seek public comment on significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.” This was a big complaint from banks.

Fed Vice Chair of banking regulations steps down. On January 6, the Fed announced Fed governor Michael Barr – appointed by Biden as Federal Reserve Board Vice Chair for Supervision, and was targeted by the incoming Trump administration – would step down from that role, making room for Trump to appoint one of the Republicans on the Board of Governors to that top slot of bank regulations.

Withdraws from NGFS. On January 17, the Fed announced that it has withdrawn from the Network of Central Banks and Supervisors for Greening the Financial System that it had joined in December 2020 to please the incoming Biden administration. It said that “the work of the NGFS has increasingly broadened in scope, covering a wider range of issues that are outside of the Board’s statutory mandate.”

Will review bank regulations. On January 31, the Fed (jointly with other bank regulators) announced that it would hold a virtual public meeting in March “as part of their review of [bank] regulations, as required by law,” citing the Economic Growth and Regulatory Paperwork Reduction Act. The law “requires the agencies, with input from the public, to review their regulations at least once every 10 years to identify any outdated or otherwise unnecessary regulatory requirements applicable to their supervised institutions.”

It said that this was “an opportunity for interested stakeholders to present their views on the six categories of [bank] regulations listed in the first two Federal Register notices: applications and reporting; powers and activities; international operations; consumer protection; directors, officers and employees; and money laundering.” So now, it’s suddenly time to review these banking regulations.

Scrubs DEI pages and policies from its website. The Federal Reserve Board of Governors, a government agency, has removed its DEI pages and references to any DEI policies from its website. At the FOMC press conference on January 29, a reporter challenged Powell about Trump’s Executive Orders to scrub DEI out of the federal government.

Powell said, “We are reviewing the orders and associated details as they are made available. As has been our practice over many administrations, we are working to align our policies with the executive orders as appropriate and consistent with applicable law. I want to add that I am not going to have anything more specific for you today on this whole set of issues.”

But the reporter didn’t let up: “I am wondering how you are getting that to be consistent with the Dodd-Frank law’s stipulations about maintaining an Office of Minority and Women Inclusion?” Whereupon Powell said acidly, “I did mention consistent with applicable law, right?”

So the Fed is bowing to the Trump administration on policy issues from bank regulations to DEI, in an effort to keep its monetary policy independent.

And Trump seems to understand the issue of inflation as a real threat; he ran on it, and won on it (among other factors), and now seems poised to let the Fed do its work on inflation, that’s what it looks like. We will see how long Trump’s side of this mutual understanding will last.

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  161 comments for “Trump Agrees with Fed’s Pivot to Wait-and-See after the Fed Bows to Trump on Everything Else to Keep Monetary Policy Independent

  1. Frosty says:

    Forgive me if I have this wrong, but didn’t Trump say he was going to get rid of the Fed as part of his campaign? Wasn’t Trump going to replace Powell once elected? I recall many protestations that Powell should lower interest rates as soon as Trump was elected?

    Of course, Trump likes to threaten and bully pretty much everyone.

    • Al Loco says:

      Yes, I bet someone an ounce of silver 2 years ago that if Trump won he wouldn’t get rid of the fed. The person who took that bet was 100% convinced he would abolish the Fed. Good peeps but a little too far in, I hope silver doesn’t spike for their sake.

    • Gabriel says:

      Bullying or strategy?

      • Idontneedmuch says:

        Exactly. Sometimes you need to get someone’s attention to show that you are serious.

    • Nolan says:

      I know he wanted to get rid of him but obviously he has no power to do so

      Though, I think the sovereign wealth fund signed in yesterday is a way to set up his own pseudo federal reserve.

      Not sure how they’re going to fund it though… sovereign wealth funds are usually funded by surpluses and we haven’t seen those since the 90’s lol

    • danf51 says:

      His administration is only 2 weeks old ? I don’t know what Trumps real attitude is toward the FED. I thnk he utimately wants lower rates and a weaker USD. He probably wont get that in the short term, but it will have little to do with the FED.

      Lets just watch to see if Rand Pauls recurring “audit the FED” legislation gains any more traction that it has in the past.

      Even if the FED stays…more transparency into it’s guts would be nice.

      Just Finished Reading the “Creature from Jekyll Island” – a little polemical but it did raise interesting questions.

      • NBay says:

        He is a MASTER negotiator (wrote the official “Making Deals” book, ya know) and also stable genius.

        Nobody knows what is in his mind……but over half the county approved of it, anyway…..at least by our system’s present rules.

        I don’t know what “his real attitude” is toward ANYTHING, so I voted for Bernie like I did the last three times….just to be a good citizen and participate.

        • Louie says:

          People who say they are a genius have to say that because they can’t show you they are one.

        • NBay says:

          Yeah, Louie, just like his new (and better thought out or coached) collection of pirate shipmates, I do know they are all PR pros….so any shot at “truth” is vary adjustable……and of course everyone knows what pirates do.
          That’s about the only two things I can be sure of, anyway.
          Check out Bannon’s Phil Robertson Movie for some of the rest of the story of his election.

          Seems like it’s always like Thursday on the old Mickey Mouse Club….”Anything Can Happen Day”

    • Dave says:

      Well, I agree, and Wolf’s comment today that Trump “now seems poised to let the Fed do its work on inflation, that’s what it looks like”, don’t make a lot of sense to me. Trump is now saying that the Fed should keep lowering rates, which doesn’t sound like he’s “letting the Fed do its work” on inflation.

  2. Bull and Bear says:

    Question about debt limit: currently the limit is $36.1 trln. If say Treasury Department buys back 36 trillions of USD and issues a debt of $100 with ZILLION % annual interest rate, would the debt limit still be a problem?

    • Wolf Richter says:

      Where would the Treasury Dept. get the $36 trillion in cash from to buy back $36 trillion in Treasury securities??? The Treasury has about $800 billion cash in its checking account right now, that’s all it has, and it’s not quite enough to pay for $36 trillion in bond buybacks.

      • Nathan Dumbrowski says:

        From Wikipedia…Legal basis

        Common obverse of American Platinum Eagle coins, a platinum commemorative United States coin that has been issued in denominations of up to $100 under the authority of 31 U.S.C. Section 5112.
        The issuance of paper currency is subject to various accounting and quantity restrictions that platinum coinage is not. According to the United States Mint, coinage is accounted for as follows:[5]

        Since Fiscal Year (FY) 1996, the Mint has operated under the United States Mint Public Enterprise Fund (PEF). As authorized by Public Law 104-52 (codified at 31 U.S.C. § 5136), the PEF eliminates the need for appropriations. Proceeds from the sales of circulating coins to the Federal Reserve Banks (FRB), bullion coins to authorized purchasers, and numismatic items to the public and other customers are paid into the PEF and provide the funding for Mint operations. All circulating, bullion and numismatic operating expenses and capital investments incurred for the Mint’s operations and programs are paid out of the PEF. By law, all funds in the PEF are available without fiscal year limitation. Revenues determined to be in excess of the amount required by the PEF are transferred to the United States Treasury General Fund as off-budget and on-budget receipts. Off-budget receipts consist of seigniorage, the difference between the receipts from the Federal Reserve System from the sale of circulating coins at face value and the full costs of minting and distributing circulating coins. Seigniorage is deposited periodically to the General Fund where it reduces the government’s need to borrow.

        The concept of striking a trillion-dollar coin that would generate one trillion dollars in seigniorage, which would be off-budget, or numismatic profit, which would be on-budget, and be transferred to the Treasury, is based on the authority granted by Section 31 U.S.C. § 5112 of the United States Code for the Treasury Department to “mint and issue platinum bullion coins” in any denominations the Secretary of the Treasury may choose. Thus, if the Treasury were to mint one-trillion dollar coins, it could deposit such coins at the Federal Reserve’s Treasury account instead of issuing new debt.[6][7][8][9]

        • danf51 says:

          See how far you get in Federal Court with Wikipedia references…

          Here is an interesting youtube video about a guy who bought a Silver futures contract from COMEX and tried to Stand for Delivery. An interesting take of the differences between legal, contract law and reality

          Apologies if links are not allowed in comments:

        • Goldendome says:

          Anyone have some spare untarrifed metal out there that I could use to re-gild my dome?

        • Dave says:

          There’s a huge difference between giving the Treasury the right to mint platinum bullion coins “in any denominations they choose” and giving them the right to issue such coins in any “quantity” they choose…

    • Robert Yates says:

      You might wanna do some research, around 2009, it was found that funded and UNFUNDED debt for the US was somewhere around 300 Trillion. Look it up. That was then, I can only imagine what it is now. Also unless you stop printing…inflation. It is the expansion of the money supply, which is now, OUT OF CONTROL. Brace for impact

      • Wolf Richter says:

        Throwing around this “unfunded debt” is hilarious BS. It’s like you expect to have two kids, one next year and one in three years, and you expect them to buy a house in 30 years and 32 years, and you expect them to get a $1-million mortgage in 30 and 32 years respectively to fund the purchase of their house in 30 and 32 years, and so as of this moment, your “unfunded debt” is $2 million and you’re already bankrupt 🤣

  3. Lune says:

    Powell hasn’t maintained independence in monetary policy. It just so happens that, at this moment in time, Trump happens to agree with him. I’m not sure what leeway Powell feels he’s gained, but whatever it is, I’m 100% sure it’s illusory. The moment Trump feels interest rates are too high, he’ll make that phone call to Eccles building and Powell will likely come running to do his bidding.

    If Powell couldn’t stand up to Trump in 2019, what makes anyone think he’ll do so in 2025? Or does he think Trump is less controlling this time around than the last time?

    • Wolf Richter says:

      You’re forgetting inflation – the crux of Trump’s statement, as explained in the article, including chart. In 2018, inflation was below the Fed’s target when the Fed hiked rates, and Trump got pissed off. Now inflation is well above the Fed’s target and rising. Trump understands that Biden lost in part because Americans were pissed off about inflation. That’s why he agrees with the Fed. He wants that inflation to go away.

      • Digger Dave says:

        Can you surround yourself with asset holders, who are seemingly immune to inflation and want rates to drop, and keep inflation at bay? Something will have to give.

        • ShortTLT says:

          What makes you think asset holders are immune from inflation and want rates to drop?

          I own some different assets and inflation hurts me plenty. I think rates need to stay higher for longer.

        • Franz G says:

          shorttlt, for most people with tons of stock, zirp is the best thing that can happen, as it causes a stampede to buy.

        • phleep says:

          Folks holding tons of stock at current nosebleed valuations who want ZIRP and lots of stock rise are iffy in their reasoning. A more stable and balanced portfolio is a better idea for all weather, IMO. Look what just happened with the big tech names, on one piece of news, and they are an outsize percentage of SP500. Not stable.

      • Lune says:

        Right. I don’t disagree with the reason why Trump is agreeing with Powell, I’m just saying that true independence is when you’re able to do something that the President disagrees with. Therefore, there’s no evidence yet that Powell has “saved” monetary independence. That will only come when they disagree and we see who’s policy gets implemented.

        If Powell and Trump are currently both on the same page about interest rates, that’s great. But past history indicates that if Trump ever changes his mind, Powell will follow him rather than his own plan.

        • Wolf Richter says:

          Agreed. There is not really a “true independence” at the Fed. Before Volcker jacked up rates into the sky, he and Reagan sat down, and he explained to Reagan what was necessary to break the back of this big inflation wave, and Reagan — who’d defeated Carter in part on inflation — came onboard and then publicly explained to the American people why these high rates were necessary. Volcker had the backing of the President. And he plunged the US into the big nasty Double-Dip recession with Reagan’s backing. He couldn’t have done it if Reagan had totally opposed it. That duo made it work. But it was a duo.

        • Rick Vincent says:

          See Arthur Burns with Richard Nixon for the 1972 election. The Burns Fed lowered rates to help Nixon win despite post-Vietnam inflation percolating and a then unknown 1973 oil crisis!

    • Brian says:

      My understanding is that the Fed ended rate hikes and QT in 2019 for monetary reasons, not because of Trump pressure.

      • Wolf Richter says:

        Last rate hike was in Dec 2018, not 2019. That December meeting was the pivot meeting when it essentially said that this was the last hike, and it was.

        In the spring of 2019, it announced that it would fade out QT, and QT ended in mid-2019.

        Obviously, the Fed came up with all the monetary reasons for doing so. Powell never once said, “We’re ending this tightening cycle because Trump is keelhauling me every day in public until we end it.”

  4. Phoenix_Ikki says:

    As I said before have my popcorn out, I am sure there will be more to come and I have a feeling at the end, it might likely not be favorable for savers benefitting from fixed income return in the last 1-2 years in regards to interest rates…let’s see if inflation is truly the silver cross that can be Drumpf at bay, although the shadow POTUS might not agree

    Btw, in a more normal or sane version of the multi-verse..the connection between DEI and all the problems FED have to deal with and address is simply bonker but here we are

    • Wolf Richter says:

      “..connection between DEI and all the problems FED have to deal with and address is simply bonkers but here we are”

      There is a part of me that thinks that Powell was super-relieved to have an excuse to get rid of all this stuff.

      • Ben R says:

        Seems to be a theme amongst powerful rich straight cis white men. If life is great for you, why bother concerning yourself with the basic needs of others who aren’t so privileged?! Don’t just let others suffer- go out of your way to ensure they stay in their place. Don’t separate the administrations hatred of DEI with their support of white nationalism, it’s one and the same. ‘muricah!

        • Next Shoe To Drop says:

          Your use of “cis” already makes anything you say inherently suspect. Privilege is earned. America was built on merit, not DEI. It can only be rebuilt on merit. Giving people with known mental disorders jobs in govt makes no sense.

          A cross-dressing, bald-headed, lipstick-wearing, property-stealing Matt Damon look-alike doesn’t exactly scream merit, does it?

        • Gooberville Smack says:

          Ben,

          thank you for your concern regarding the underprivileged and your fight against hatred. You truly are a beacon of virtue! May all the suffering, oppressed souls on tiktok find the strength to make it through the next four years coexisting with Americans that don’t gaf!

        • Ben R says:

          Next Shoe,

          You’re suggesting that merit is based on the way someone is dressed and not their experience, knowledge, and competencies. Dressing differently doesn’t mean someone has mental health issues. Taking offense by the way someone dresses, when it has no impact on you or your life, now THAT is something to talk to your therapist about…

          The US was founded on equality. A diverse melting pot of immigrants, everyone had an equal chance. That was the point. America WAS built on DEI, the founding fathers just didn’t call it that. The media had spun DEI to be a negative even though it’s advocates have no idea what these roles actually do.

          Speaking of the founding fathers… Have you seen their powdered wigs? What a bunch of FREAKS! These people were the OG cross dressers, and that’s the last thing they were worried about.

        • Happy1 says:

          @Ben R

          American values are “equality before the law” as outlined in the 14th amendment. Everyone given an equal chance. Not Animal Farm style “some animals are more equal than others”. Affirmative action and DEI aren’t about giving everyone a shot, they are about giving some people more shots because of skin color or gender or sexual preference. This contravenes the plain language of the 14th amendment and also is against the views of strong majorities of Americans of all races, and it’s time to have our Federal agencies reflect the rule of law.

        • Idontneedmuch says:

          Ben R- DEI is nothing but affirmative action under a different cloak. It’s reverse discrimination. Isn’t hiring or not hiring someone based on the color of their skin racist? Most Americans are opposed to this and theirs votes represented that. Let get back to hiring our best people based on merit and character alone.

        • Mark says:

          Hey Ben

          Did you miss the election results ?

          4 Star Generals dressed in skirts, pantyhose, and make up are over.

          Pretty happy to see that. Unlike you.

        • Franz G says:

          ben r, that’s complete nonsense. america was not founded by immigrants. it was founded by colonists, and they were not that diverse. huge difference, and anyone who says otherwise is being intentionally dishonest.

          further, it was not founded on equal outcomes, which is what dei is about. it was founded on equal opportunity, and even that was largely lip service

        • Ben R says:

          Happy1, others, I agree to some extent. Affirmative action isn’t the answer if it’s not fair and equal to non-minorities. But history has shown time and time again that ignoring doesn’t result in equality. Look at pay gaps between white men and equally qualified women/minorities. We can’t just ignore it and say that’s how to be equal, it doesn’t work. DEI isn’t affirmative action, it’s not any one thing, it’s run differently by every organization, regardless of what Fox tells you it is. I’m sure it’s often implemented very poorly and inefficiently, just like anything can be. It’s nuanced and there needs to be a middle ground, but ignoring inequality doesn’t with, it’s failed the majority of Americans.

          It’s pretty funny that the main arguments are anti-trans when the vast majority of those impacted are women, black folks, Hispanics, etc. Y’all are insecure AF if the existence of queer people gets your tighty whiteys in such a bundle.

        • phillip jeffreys says:

          Your definition of equality is suspect.

        • RES says:

          🙏 amen. Preach brother.

        • BH says:

          Ah yes, equality. Where the rich white landowners who owned black slaves and didn’t allow women a say in affairs was prevalent.

          Equality has always been a facade in the US. In modern times, opportunity is present, but short of a reconfiguration of everyone’s DNA, I don’t know of equality will ever truly exist.

  5. Randall Wall says:

    I thank God we are getting rid of the DEI nonsense.. It’s expensive and not what America wants.

    • OutsideTheBox says:

      RW

      Not true.

      Although it seems to be what YOU want.

      • ed says:

        Where exactly did DEI help an organization run better if non profit or increase profit for a corporation? Examples please.

        • themsicles says:

          Where exactly did DEI hurt profits? Examples please.

        • Inexcess says:

          Ed
          You are too close to the “screen”, stand back a bit and you will see what you ask for.
          A drop of ink in a litre of water is different than a drop in a large pool. (It’s only a drop)
          Oompa Loompa highlighted the first scenario, the lemmings can’t see the forest for the trees. Good luck…. it’s history repeating itself

        • phillip jeffreys says:

          themsicles…..guess we’ll find out from the law suits being filed by rejected controller candidates with perfect exam scores. 1000 open positions.

          And you’re right, Bud Light didn’t shoot itself in the foot.

          DEI was/is discriminatory.

          Not to mention a waste of time. I sat in on the front end of that transition in gov’t – it was happening before it became formalized in gov’t EOs. Endless handholding exercises where the collected victims opined about a thousand different things that made their private lives so difficult. It was nice sitting in a sob session for upwards of two hours – and getting paid!

          It was my experience, btw, that good ideas came from anyone who worked hard, kept up with changes in human capital, committed top the organizations’s mission statement. t was also my experience that HR departments were corrupt beyond all belief (this came from insiders) and that DEI was one vector that propelled this.

          Doesn’t matter at this point. It’s getting shut down and the power structure that acted with impunity over the last decade or two is being dismantled.

          Real power plays being made now. Accountability is riding just behind.

      • sufferinsucatash says:

        Outside

        It’ll all eventually be reversed. It’s all illegal as heck

    • Escierto says:

      Are you a white man? Yeah, I thought so.

      • Ben R says:

        I hate to say the quiet part out loud, Escoerto, but when Randall says its not what “America”wants… He’s not talking about all Americans, he’s talking about his vision of what he wants America to be.

        People don’t understand that DEI isn’t about maximizing profits (although there’s reason to believe it may). It’s about tipping the scales towards constitutionally protected equality because of racism, sexism, and other isms that are ingrained in American society.

        • Cory R says:

          Whatever selection process was used to assemble the Secret Service detail Trump had on the campaign trail, it was a failure. It didn’t appear that proficiency with a firearm or willingness to take a round were properly prioritized.

        • Inexcess says:

          Thanks Ben
          I am reminded of an old statement “ignorance has no cure”

        • Waiono says:

          Yes, keep telling yourself that. Ask any female athlete now competing against biological men in sports. What America wants is reflected in the last election. It was not Kamala and a continuation of Biden’s policies.

        • Gooberville Smack says:

          “Isms that are ingrained in American society.”

          President Trump will flush this kind of crap down the canals of history. And none too soon.

        • Ben R says:

          Waiono, there are complexities and edge cases, nothing is black and white. If your response to “people should be treated equally” is “WhAT aBouat tHe FemALe AthLeTes,” you might want to lay off the media and do some self reflection

        • Happy1 says:

          Strong majorities of Americans of all races support the end of racial preferences. All races. If you believe otherwise, you aren’t reading the polls, which are extensive, and have been this way for decades. And we have clear guidance from the 14th amendment, which requires equality before the law.

        • phillip jeffreys says:

          Doesn’t matter.

          There are/were winners and losers in all of this.

          DEI spawned all sorts of dysfunctional outcomes. The hubris involved in all of this undermined it.

        • Ben R says:

          Happy, as mentioned above, the problem is that equality doesn’t happen on it’s own.

          “Strong majorities of Americans of all races support the end of racial preferences”

          Exactly. That’s what I support as well. Ignoring it as if it’s not a problem doesn’t result in the end of racial preference, it results in bias and inequality.

      • Idontneedmuch says:

        Pretty assuming to say something like that based on someone’s opinion. It’s like you believe that only white men voted for Trump.

        • Escierto says:

          The 43% of Latinos who voted for him are regretting that decision each and every day. My wife’s Latino boss voted for Trump and the other day his wife got picked up by ICE and spent two days in detention before they agreed that, yes, she is a US citizen. He told her they are never voting R again for the rest of their lives.

        • phillip jeffreys says:

          Exactly.

          The same people don’t give a rat’s patout about the folks who lost out. They also don’t give dang about all the illegalities propagated over the last decades – at scale (702 about queries anyone?).

          Their cries for fairness ring hollow.

          Stated my piece. I’m done with this theme. Stand by and see how all this plays out. And I do agree, it is possible that the pendulum, which had strung too far in one direction, may swing too far the other direction. We shall see.

        • Franz G says:

          escierto, i don’t believe that story for a second.

    • Gabriel says:

      It’s what I voted for and happy to see DEI die!

      • ApartmentInvestor says:

        LESS than 10% of the kids in CA Public Schools are white males, but every day the teachers tell the class they are the problem and DEI will fix everything.

        • Tom says:

          “every day the teachers tell the class that [white males] are the problem…”?

          Bruh, get a grip on reality and learn how to critically think and reason. I’m a middle age white male with a teenage white male son (multiple, actually) and there has never been one teacher tell them they’re a problem, let alone every day. That said, I’m more than happy to talk to them about their responsibility, male or not, white or not, and how to make the world a better place.

          Oh, but that’s right, let’s keep the focus on the big white male vacuum and groupthink you’re happy to exist in. Keep playing that trite argument and make it about DEI to make you feel better at night.

        • BobC says:

          I’m a CA public school teacher, and I never do this.
          You’re full of shit!

        • phillip jeffreys says:

          But the teachers unions these people belong to DO SAY THIS.

          So the responses to your post below are dishonest.

      • sufferinsucatash says:

        Yeah ummm Congress didn’t make a law.

        So ummm.

        Temporary…

        Glad the olds are happy tho

        • phillip jeffreys says:

          You don’t get it then.

          The structure of gov’t is being changed. Whether it succeeds or not is open ended. But it is being restructured internally. Couple to this to a severely fractured Dem party that has no viable younger leadership and it’s easy to see where this is all headed.

          We shall see whether Trump over-reaches.

    • Glen says:

      This is all so funny. Things like attacking DEI is what keeps Americans divided and seeking a political party that represents the working class. If we could ever achieve even a little class consciousness none of these things would issues.

      • Gattopardo says:

        Glen, I’m pretty sure the existence of an over-exuberant and over-the-top DEI is a significant contributor to American division. The majority of Americans don’t support DEI as it has come to be shaped, yet the vast majority *do* believe in equal rights/opportunity. So it comes down to the method in which you achieve that, which is obviously very divisive!

      • Sams says:

        Divide and conquer, refined and applied with great success. The downside is that even those govern have lost sight of what have been done and start to act with their own spin as reference.

      • CrazyDoc says:

        While I am fine with removal of DEI, there definitely should be increased support or funding or programs to ensure that everyone (especially from disadvantaged backgrounds) has access to a top education from day one. Trying to address the issues of individuals placed in a poor educational system 20 years later is like trying to close the gate after the horse has bolted.

    • LT says:

      Partly, DEI had the unfortunate timing of coming along after decades of hyper-financialization had already started done its wreckage.
      And who was responsible for that?

    • LT says:

      Basically, DEI came along and tried to integrate into house that was already burning and participants in those programs are now taking the heat.

    • Dave says:

      So you speak for all the rest of us, Randall? And just where did you get all the money it took for you to conclude that it’s “not what America wants”?

  6. Waiono says:

    Gee, no question to Powell about Mr. Rodgers in the neighborhood?

    3 days ago John Harold Rogers, 63, of Vienna, Virginia, a former Senior Adviser for the Federal Reserve Board of Governors (FRB), was arrested today on charges that he conspired to steal Federal Reserve trade secrets for the benefit of the People’s Republic of China (PRC).
    …..
    Dude was helping the CCP front run the Fed for 6 years while the FBI watched him.

    • Wolf Richter says:

      The Fed meeting was on Wednesday Jan 29, which was five days ago, before the arrest.

      • Waiono says:

        The investigation started in 2018. I read a long synopsis of it. If true, the Fed needs fix a leaky boat. I find it hard to believe that Powell wasn’t alerted at some point before the arrest.

        • Wolf Richter says:

          Powell likely knew about the investigation. But that wasn’t the question I replied to. I replied to this question:

          “Gee, no question to Powell about Mr. Rodgers in the neighborhood?”

          … no question FROM REPORTERS… THEY didn’t know.

  7. Jonno says:

    As a complete outsider, situated about as far away from the United States as one can get without leaving the planet, I find the speed with which breathtakingly consequential decisions are being made, and then reversed, to be really quite frightening.

    • Sandy says:

      Imagine how frightening it is watching a coup on your government in real time. Ask the people of Hungary what it’s like.

      • johnbarrt says:

        Ask Joe Biden what it feels like ( although getting any type of cogent answer would be like hitting the Powerball )..

      • nefff says:

        No “imagine” needed, we just lived it 2019-2023…

        I don’t know why you or anyone is surprised of the reversals underway 538/270 is kinda a mandate for a directional 180, no?

        and frightening? haha, how dramatic

        • Inexcess says:

          Nefff
          The stats show 76.8 v 74.4 mil.
          Statistically this is 1 to 1.
          You numbers need context.
          Btw I am a theoretical physicist (or sometimes called mathematical physicist) so don’t try that with me.

        • nefff says:

          inexcess;
          a “theoretical physicist “, huh, impressive.

          well your numbers would make your statistically even call true in a democracy, but, and this is for “context”, this is a representative republic (for now anyways) and the electoral college decides the election outcome.
          orange guy won, my numbers sourced from the interweb represent the final college tally.

          but they probably didnt teach the difference in theoretical physicistiest school so ill give you a pass this time.

        • Mirage says:

          Nefff

          The will of the voting public is expressed more precisely using the popular vote since that’s the actual way each person voted. The electoral college is a mechanism to give rural areas votes more power. Assuming Inexcess’ numbers for the popular vote are correct, then just under 50.8% of the population is supportive of trump’s policies. That’s hardly a mandate from the voting public.

          As for a living through a coup in 2019-2023, that’s ridiculous. There was a coup attempt on Jan 6, 2021, but it was unsuccessful. Nothing else like a coup happened during that time period.

        • phillip jeffreys says:

          Mirage…arrant nonsense.

          Putting your loaded language aside – deliberately one imagines since the fine details don’t support your generalizations either, the electoral college was put in place precisely to achieve a balance between popular vote and state representation. Constitution and all that other unattractive stuff.

          Otherwise, one ends up, due apologies to those with vested interests otherwise, one party state gov’ts like CA. Tyranny of the majority counterbalances, unwieldy as they can be be, built into the Constitution.

          Got it. You don’t like the direction of gov’t right now. Clearly a majority, less the 20 million who mysteriously voted in 2020 but not this time around, has decied a shift in course is needed.

        • Ben R says:

          I also think the vote doesn’t represent what the brainwashed people “want.” First we’re force-fed two garbage candidates to choose between. Then, the Ds significantly out-spend the R’s in the election run-up. Kamala doesn’t have much time to establish policy, not that it would’ve helped. B and D policy is way better for the middle class but they’re strategically inept, while the R’s are pretty evil and anti-middle class but know how to run a campaign. It’s a broken system and none of it is what anyone wants.

        • numbers says:

          Still amazing to me that anyone with a connection to the internet can blast out false information without being ashamed of themselves.

          The data (easy to find):
          2020:
          Biden 81.3 million votes (51.3% of votes, 33.8% of eligible voters)
          Trump 74.2 million votes (46.8% of votes, 30.9% of eligible voters)
          2024:
          Harris 75 million votes (48.3% of votes, 30.6% of eligible voters)
          Trump 77.3 million votes (49.8% of votes, 31.6% of eligible voters)

          No majorities anywhere. No missing 20 million votes (3.2 million less, or 1.3% of the eligible voters).

    • HollywoodDog says:

      The speed at which decisions previously *weren’t* being made was also quite frightening.

      • Oldguy says:

        That is usually the difference between bipartisan governing and authoritative governing.

        • Sean Shasta says:

          @Oldguy: Yes. A lot of people fail to understand that the slow decision-making in democracies is by design – so that the pendulum doesn’t swing too far and too fast either way.

          Unfortunately, our educational systems don’t teach these very well and/or our students have not been paying attention.

        • Sean Shasta says:

          To modify my post a bit – I should have said “functioning democracies”.

      • cas127 says:

        Agreed.

        50 years of increasingly encrusted fiscal cancer (see national debt) and few squeal. Because it is *gradual*.

        Two weeks (of mostly show pony exercises so far) to address the cancer and the “Establishment” tells the nation that it is the Apocalypse.

        • phillip jeffreys says:

          If it’s dog and pony stuff – why are the Dems so worked up over it?

          Specifically, why are they so exercised over losing clearances, examination of required gov’t records/documentation, bogus funding, accountability for roll calls in which they exempt themselves from mandates and intelligence queries the rest of are subject to?

          There’s always two sides to every story. None of this is black and white.

      • Anthony A. says:

        I nominate this as the post of the day!

        • ApartmentInvestor says:

          @Anthony A. Sandy will probably want to start planning a “post of the day comittee” that will make sure the “post of the day committee” is diverse enough. In one to three years of planning and intervirews we should have a “post of the day” committee, but then it will take at least two MORE years to hire a staff for the committee and get them office space (with expensive TIs built by politically connected contractors) that they will never use since they will “work from home”…

        • Sandy says:

          @apartmentinvestor. LOL. My guy, you need to put the Internet down and go do something productive.

      • phillip jeffreys says:

        I’m still trying to figure pout who made the decisions the last four years!

    • Happy1 says:

      What was it someone said in 2009? Elections have consequences? They sure do. In both directions.

    • King is Dead, Long Live the King! says:

      If you are going to kill the King, you better not f*ck it up. Go watch the movie, “Godfather I or II”. Remember when Michael cleans up after the failed assassination of his dad? Or, young Vito coming back to kill folks who killed his family?

      This is just a very public cleaning up the house after a brutal victory. 4000 years ago or today, same story: The winners decide which losers will die. Or in our country, elections do have consequences.

      I thoroughly enjoy this drama. Normally, it is a quiet affair in the USA, but everything that has happened must be answered in metaphoric blood. This is just a blood letting: all the bad humors are being flushed out. After a good rain, everything will washed away and forgotten.

      Now, the question is how the Democrats are going to recover from this utter defeat and destruction of their party. Maybe after 12 years after 2 terms of Vance. I heard rumors that Hillary Clinton will go for another run when she is 99 years old or something like.

      • AuHound says:

        No, it is President for Life. Vance runs for POTUS as one can only RUN for a maximum of two terms. No ban exists on Trump running for VICE President. Then if Vance resigns five minutes after being sworn in…

        There is nothing about limits on SERVING as many times as one wants.

        • AuHound says:

          Text. Section 1. No person shall be elected to the office of the President more than twice, and no person who has held the office of President, or acted as President, for more than two years of a term to which some other person was elected President shall be elected to the office of the President more than once.

          Elected and serving are two different things.

  8. Oldguy says:

    How would Trump make monetary policy something other than Independent?

    • phleep says:

      > How would Trump make monetary policy something other than Independent?

      A compliant Congress could do it. But the political capital spent would be huge, and the other “promised” priorities would probably have to be sidelined. There is a midterm Congressional election in 2 years.

    • fajensen says:

      Same way as Turkey, Hungary and Russia:

      Load the thing up with cronies and then tell them what to do!

      If the FED HR / Wages is running from the same platform as the US government, then Elon Musk and his cauliflower-haired minions already control the staff’s wages, pensions and whatever their personnel file says about them!

  9. Ol'B says:

    Maybe Trump has been reading this website. Where we see that lower short term rates in the last six months have actually led to higher long term rates, and higher mortgage rates because of inflation expectations. Which makes the housing market weaker and makes people angry.

    Maybe 4.5% short, long, and in between is just fine if it means 5.5-6% mortgages and inflation actually moving consistently towards 2.00% throughout Trump’s term, if ever so slowly. If for one would be perfectly fine with no Fed rate changes at all for four years. “Stop picking at it” as they say.

  10. Swamp Creature says:

    State Farm just announced a 20% increase in homeowners insurance in California. Others will follow. That’s some serious inflation in services down the road.

    • Wolf Richter says:

      Well, they announced that they’re seeking approval to raise rates. They haven’t gotten the approval yet. But yes, homeowners insurance rates are going haywire.

      • Gattopardo says:

        To anyone who thinks insurance rates are too, well, would YOU insure a home for less? Or even these higher prices? If a friend asked me to cover him, I sure wouldn’t (even if that single home’s max claim was easily within my affordability).

    • DougP says:

      22% for homes, 15% for renters’ policies, and 33% for income properties. Sounds fair……..

    • sufferinsucatash says:

      Financed by California power and light.

      Catchphrase: “oh sh….”

    • rojogrande says:

      We have State Farm, and 20% would be awesome! Anything under 100% and we won’t even bother shopping around. Our increase was a little over 30% last year, after a 50% increase the previous year. If it’s only 20% this year at least the rate-of-change is slowing down. I’m just hoping we’re not dropped altogether this year and kicked to the California FAIR plan.

      After watching these latest disasters, Gattopardo makes a fair point.

      • VintageVNvet says:

        Way I read it red, the 22% was an emergency immediate raise request, NOT the annual raise request???
        Crazy increases in required costs of home ownership for most folx in are NOT going to help Trump or any other politician such as governors, etc.
        And it spreads widely into every aspect of our lives: Just had the first haircut away from home since the covid panic started, and the price was exactly double at the same place by the same person; almost all our food prices are up at least 50% same time period, not including eggs of course.

        • rojogrande says:

          VVNV,

          That’s my understanding too and why I’m expecting much higher overall increases. An increase significantly over 100% this year and we’ve decided to throw in the towel and move as we’re close to the downsizing stage of life anyway. On the bright side, more housing inventory! In the first 20 years we lived here our premiums roughly doubled. They doubled again in the past two years. Now we really don’t know what to expect. These HOI increases will definitely necessitate spending cuts elsewhere for many people.

        • AuHound says:

          Im with State Farm, my policy went DOWN (by all of $.78, but still down). But then I am not in California.

          Before you move, check the insurance rates as well as the property taxes in your new area.

  11. WB says:

    If the China trade tariffs go into effect, then you can expect the durable goods inflation to rise. Looks like there is about ten days to negotiate.

    Interesting times.

    • SoCalBeachDude says:

      Barron’s: China Retaliates Against U.S. Tariffs. Trump-Xi Phone Call Expected.

    • ShortTLT says:

      Most stuff we get from China is already warehoused domestically. Those prices won’t rise right away.

      • sufferinsucatash says:

        If the ship has left China, technically can it be tariffed? Isn’t it the property of the Dutch at that point.

        lol 😂

    • fajensen says:

      China can also have a bit of fun with some of those very vanilla low value items, like fasteners, that our production relies on.

      Last time, we couldn’t get 6 mm nuts and bolts for assembling electrical bus bars.

      Maybe this time we won’t get Molex crimp contacts and those clips we use for fixing PCB’s.

      • phillip jeffreys says:

        Yes….but how will they feed their people once this escalates and politician’s elect to go for the jugular?

  12. KGC says:

    The only way inflation is going to go down is if the interest rates go up and they continue to draw down the available cash supply. There is no soft landing, and people keep forgetting that 2% was supposed to be the top rate of inflation, not the floor.

    • sufferinsucatash says:

      There is a real world in which the fed rate is lowered to 0.

      It may happen.

      Hold onto your hats if it does.

    • phillip jeffreys says:

      Gov’t debt has to be reversed; MMT was a sham and irresponsible pending combined to put us where we are.

      Agree, no matter which direction this all heads from a poltical perspective – it doesn’t look pretty.

  13. Sean says:

    There is a scene in the Mat Walsh movie ” Am I a Racist ” where he goes to the Washington Monument with a petition to change the name to the George Floyd Monument, The amount of people that signed the petition is frightening. He pretends to be a certified DEI expert in the movie. The amount of money charged by so called real DEI experts is shocking

  14. Debt-Free-Bubba says:

    Howdy Folks. Hopefully ZIRP will never return. It never should have happened. Govern ment will find ways to create new bubbles and continue to pick the winners and losers they like. Good Luck

    • Goldendome says:

      Bubba, agree debt free, but this is the USA—home to the Ponzi economy that inflates or dies.

    • ru82 says:

      We never tried NIRP like they did in Europe. I would not mind being paid to borrow money.

  15. AV8R says:

    Good morning to all, broken record here….

    Had the Fed just left the QT at $60B instead of cutting it to $30B we’d be making progress on inflation.

    • Depth Charge says:

      All by design. The FED does not fear inflation, they fear DEFLATION. They are running what can only be called an “inflation entrenchment operation,” whereby they ensure that high asset prices and the associated effects of their money-printing extravaganza are permanent.

    • Kevin says:

      Agreed. With bitcoin and stock market price out of control, there was no reason to slow dow QT at all. The orgy of speculation is insane.

    • Happy1 says:

      Wish I could give this 1,000 thumbs up

    • Idontneedmuch says:

      The Fed needs to focus on inflation. Americans do hate inflation. Trump knows that, heck we all do. Don’t waste their time and attention on political virtue signaling. DEI and “greening the financial system” and worthless distractions.

  16. brewski says:

    Trump looks great on fiscal policy. Can he get those deficits down?

    Maybe, but his approach to monetary policy would be to drive interest rates down. The two don’t line up.

    Definitely interesting times ahead.

    B

    • Wolf Richter says:

      If Trump’s fiscal policy helps bring inflation down, with support from the Fed’s monetary policy, than interest rates will come down just fine, even long-term interest rates which really matter. But if inflation heads higher, long-term interest rates will head higher.

  17. Glen says:

    Hopefully the trade wars against Mexico and Canada continue to be just threats. That means those countries will need to pretend to address Trumps complaints, or Trump will have to pretend they are. Threats are only good for a limited time if they are never followed through on. Trump doesn’t wasn’t want to see inflation and escalation of trade war will have that affect.

    • phleep says:

      I am not confident Trump comprehends the dollar, crypto, banking, systemic financial stability, inflation, or any other critical finance-related matters he is throwing around varied outbursts on. Many of his remarks convince me of the opposite, but one just never knows with him, because he seems incapable of a straight, reliable statement, that is not driven by sheer impulsiveness and attention-deficit. He does seem to have sporadic acceptable, even good, ideas.

  18. John says:

    I thought Trump was a strongman. He proved himself weak by placating to Canada and Mexico. He has increased Justin Treadeau’s popularity in Canada. A few days ago, the liberals were expected to lose the election by a landslide. Now it seems the liberals might even win thanks to Trump’s flip flop.

    • Inexcess says:

      Please add, ALL Canadians see the Canada conservative party leader as an image of this other fella in the south and they want nuthin of that nonsense

      • MountainTime says:

        Glad to help, Inexcess. Sorry you’re going to have to waste law enforcement sitting around pretending to keep non-existent Canadian fentanyl out of the US.

        We are not all old white guys and young incels sitting around bashing DEI. Some of us even think that women should get equal pay for doing better jobs than those guys. That really gets them enraged.

        • sufferinsucatash says:

          You know who has fentanyl…

          The medical community!

          Gasp! 😱

          Get out the pitch forks, head for the surgery centers! Shut em down! Shut em down!

          Just kidding… but with these yahoos who knows right?

        • ShortTLT says:

          You realize fentanyl in professionally manufactured pharmaceuticals is completely different than street fent right?

          Easy to not care when it’s not your friends dying.

    • phleep says:

      Weirdest honeymoon ever.

    • phillip jeffreys says:

      Not our problem!

  19. Spencer says:

    Any injection of money can be robust, net neutral, or harmful. So, the economy can slide while inflation accelerates.

  20. Matt S says:

    A lot of triggered comments today on just three words. Inflation, Trump, Powell.

    Throw in “Elon” and the servers would have crashed.

  21. Nick Kelly says:

    It’s amazing to an outside observer that the main risk with this gang is considered to be to the economy.

    • Ben R says:

      Right. You’d think a likely authoritarian takeover would be on the radar. But this site is about money, and this is end game capitalism. People only care about, number go up.

  22. Thurd2 says:

    Almost certainly, Bessant or other advisors explained to Trump that if the Fed lowers short term rates, long term rates will rise, which we have just seen. The economy cares about long term rates, especially the ten year. Trump got the message and decided, wisely, to shut up about wanting the Fed to lower the Fed funds rate.

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