The grudge match between the unswayable Fed and the Executive Branch continues. Donald Trump has threatened to fire Jerome Powell citing dissatisfaction with high interest rates, but legal experts say Trump wouldn’t have the authority to do so without “serious misconduct” on Powell’s part. It wasn’t too hard to for the President’s team to find those allegations in the ongoing $2.5 billion remodel of the Federal Reserve’s headquarters. Whether or not the claims have merit sufficient to can Mr. Powell prior to the regular expiration of his term next May is still unclear. I’d say their chances of becoming BFF’s is now very small, like 4.7%.
Fed Governor Christopher Waller, a top contender to take over Powell’s post, has no problem cutting rates. Yesterday he made a case for a 0.25% rate cut when Fed meets later this month, and went even further stating that the FOMC’s overnight rates are 1.25%-1.5% above where they should be. Sounds like he’s saying all the right things to usurp the coveted throne. I am completely neutral about political policy, but you won’t hear me griping about rate cuts anytime soon. The latest polls shows only a 4.7% likelihood that a majority of the FOMC’s current voting members will vote to reduce interest rates on July 30th.
