The Fed holds
In spite of Trump or maybe because of Trump, the Fed’s Open Market Committee just finished meeting and left its Fed funds target range unchanged. Two members voted to lower the rate. Not surprisingly they were Trump’s man at the Fed, Stephen Miran who for the first time didn’t vote for a 50 basis point drop. He voted for a fall of 25 basis points. The other was Christopher Waller who is still being discussed as the new Fed chairman who likely voted for the 25 basis point decrease knowing that if he didn’t, Trump would never nominate him. Of course, I think that Trump is only stringing Waller along to get him to vote his way and even though Waller is the best choice for chairman for reasons I have previously stated, Trump will likely pick someone else. It is interesting that Bowman voted to hold. When she was being interviewed for the chairmanship, she voted to lower the rate and when she was out of contention, she voted to hold. Just a coincidence I’m sure.
Right now there are supposed to be four finalists for the job, Kevin Warsh, Kevin Hassett, Waller and BlackRock’s Rick Rieder. Although somehow the media wants you to know that Trump’s pick will do his bidding much like Miran, I would not bet on it. Miran wants his cozy job at the Council of Economic Advisors back. So he would do anything that Trump wanted. However, once confirmed, look for whoever gets the job to assert his independence from the president. A lackey chairman would roil world markets and drive Treasury yields through the roof. A Supreme Court ruling that the president cannot fire willy nilly a Fed governor will give the new chairman even more resolve than the outgoing one. Trump of course knows this. At Davos he said that the candidates “say everything I want to hear” during interviews, only to assert their independence once they have been confirmed. It’s amazing how people change once they have the job. It’s too bad, sort of disloyalty, but they got to do what they think is right.” Also keep in mind that Trump is only around for another three years and the new chairman will have a 14 year term as governor and four as chairman.
Miran’s term ends at the end of January so he can return to his other day job – chair of Trump’s Council of Economic Advisors. His short tenure at the Fed likely meant that no one at the Fed took him seriously with his constant whining about lowering the Fed funds rate by 50 basis points or more. All the headlines about the January meeting were that the Fed is resisting the pressure from Trump to lower rates. Why is that news? If anything Trump’s bellicosity, name calling, attempts to fire a governor, conducting a farcical investigation of the chairman and badgering caused the Open Market Committee to be less receptive to rushing to lower rates. Powell said as much when he released a video statement that the president was pursuing the investigation as a pretext to get him to lower rates at January’s meeting. Instead, the Fed held steady. It had lowered rates in three steps of 25 basis points and given the stubborn inflation rates and weakening dollar, paused at this meeting.
I actually think that if the president could have shut up for once and toned down the threats (highly unlikely) the members of the Board who are more focused on employment than on inflation – Jefferson and Cook – might have voted to lower. Job growth has slowed and most likely is negative. However, the Fed takes its independence seriously and a lowering of the rates would have been perceived as the Fed bending to Trump’s will and would have shaken markets worldwide. Again, the Fed is more effective at fighting inflation than joblessness where in essence it can only lead a horse to water.
haroldblackphd.com 
In your last paragraph, you posit that the Fed may have refused to lower interest rates to demonstrate their independence. I certainly hope not. I hope they make their decisions based on economic indicators. Otherwise they are just politicians and deserve to have their status determined by the current admin. You do the right thing regardless of how it looks.
LikeLike
I am speculating. But it would be logical to assume wouldn’t it?
LikeLike
Logical? No, it would be an emotional response.
LikeLike
Yes, the personalities detract fm the economy & employment..
I’m glad you mentioned SCOTUS and Cook..
Solicitor General Sauer —in Trump vs Cook —argued that the ALLEGED crimes by Cook (as jumped on by Cook’s side) had destroyed all confidence of the American people in the Fed. .
And Sauer insisted Cook is not even there- only brought back to hold place til Trump fires her. She doesn’t exist..
That her crimes are the worst in the entire history of America..
destroying the markets and eroding WeThePeople..
Guess he just mimics the Pres…
Justice Thomas asked what powers did the Executive Branch have over the Fed. This may be rhetorical, since Thomas goes first, always starts with basics..
Justice Sotomyer wants to know how, in Trump vs Cook, the President is personally affected. She doesn’t see the case as destroying the economy..
Such showmanship by Sauer is in itself disconcerting.
And having the economy be a second-place consideration to actual government power—sure demoralizes me..
As Justice Brown says, “ I’m not an economist, I’m a judge”. Maybe the executive branch should follow that ideal.
LikeLike
Sauer was only doing his job and was farcical. I think it was Barrett who said she was a lawyer and not an economist. We all know that Brown isn’t a biologist.
LikeLiked by 1 person
It is hard to know who’s talking, even when speakers are named. In a good fight, the interruptions , naming justices gets lost..
Transcripts give me a headache and aren’t as much fun..
Trump vs Cook there was actually laughing in the courtroom. And one justice- who I’m not attempting to name- said to Cook’s representation, “That’s your answer!”. So funny.
LikeLike
You are correct ..
Quote carried by many news sources :
..”But Barrett appeared unswayed. “I don’t want to be responsible for quantifying that risk,” she said. “I’m a judge, not an economist.” She then mused about whether the presence of this risk counseled “caution on our part.”
Barrett was joined by other justices who were focused on the economic consequence if the Fed’s independence were to be eroded…
LikeLike
If the Fed was truly independent. They would have begun raising interest rates much sooner during the Biden administration. Not only did they leave rates too low for too long under Biden. They then gave Harris a rate cut before the 24 Election……..The Fed was clearly playing politics and not acting independently.
Now they want us all to believe they are back to being Independent? And somehow the World Market is too stupid to see what they did during the Biden administration? That now they are upset for being called out for doing a bad job. And now will do a bad job just to spite Trump? But if they actually see things Trump’s way, the World Markets will punish us?
It just seems like a bunch of Politics from a supposedly Independent Body…….
The only question the Fed should be publicly speaking about is where are the inflation and Job numbers………….And how if Congress can reign in deficit spending, it can lower rates more…….
LikeLike
As I have always said, if you want to reduce the political impact on the Fed they should move to Kansas City and out of DC. Your comment about congress is spot on.
LikeLike
I am not going to argue the point about the rate cut in September 2024. But it was the first of three cuts that year. Since it takes about 6 months to a year for a rate cut to impact the economy it is a bit of a stretch to say it was to Harris. If that were the intent then they would have cut after the convention – or before to help Biden. I know Trump was critical of the September cut but was he negative about the other two after he got elected?
LikeLike