Trump attacks the Fed again
There doesn’t seem to be an end in sight for Donald Trump’s Fed bashing and more specifically Powell bashing. Today, in a tweet, Trump said, “Despite a Federal Reserve that doesn’t know what it is doing – raised rates far too fast (very low inflation, other parts of world slowing, lowering & easing) & did large scale tightening, $50 Billion/month, we are on course to have one of the best Months of June in US history…” He also added that had the Fed got it right, the Dow Jones Industrial Average Index (DIA) could have been “thousands of points higher.” He also compared the Fed to a “stubborn child” and said that the Fed “Blew it!”
Trump has repeatedly asked for rate cuts
Trump has been quite vocal in asking the Fed for rate cuts. While the Fed kept the interest rates unchanged on June 19, it has signaled easing ahead if the conditions so warrant. According to the CME FedWatch tool, traders are now pricing in a 100% chance of a rate cut in July. The US markets have been rallying on the expected easing by the Fed. On June 20, the S&P 500 (SPY) closed at an all-time high of 2,954, while the Dow Jones Industrial Average Index (DIA) also hit a record high on June 21 during intraday trading before slipping at the close.
Trump had also reportedly been considering demoting Fed Chair Jerome Powell. Bloomberg News reported on June 18, “Trump asked White House lawyers earlier this year to explore his options for removing Jerome Powell.”
Will Trump get all his wishes?
Well, it seems that Trump might not get all of his wishes at once. As we discussed in Trade Resolution, Easy Fed, and Growth Can’t Hold for Long, J.P. Morgan believes that something’s got to give. On June 18, while talking to CNBC, JPM Asset Management’s market strategist, David Lebovitz, said, “Something needs to give at the end of the day. You can’t have this impossible trinity of resolution on trade, an easy Fed, and moderate economic growth.”
Trump wants stupendous growth and an easy Fed despite exacerbating trade tensions with China, which in turn, is weighing down investor sentiment as well as hard data across the globe.