Ok, we’ve yet to confront the real elephant in the room: Powell’s tug-of-war with the White House over Fed independence. September’s meeting could be explosive.
Treasury Secretary Scott Bessent wants a bold 50bp cut. But as James K asked in our webinar, could Trump’s temporary appointee Stephen Miran push for even more – and would Fed board members like Christopher Waller or Michelle Bowman, both seen as future Chair contenders, follow suit?
That may be unlikely, and Miran may not even be confirmed in time. And the latest data doesn’t scream a need to go bold just yet.
Still, his brief stint could preview how the board might respond to a dovish Chair. Would they fall in line or resist? And would Powell stay on?
At Jackson Hole, though, Powell faces a more immediate challenge. A September rate cut is fully priced by financial markets. Does he push back?
Ideally, the Fed wants flexibility, especially with one more jobs and inflation report due. But signalling that now means guessing the data – something Powell won’t want to do. And that’s before considering whether he can shake market conviction in a September cut, even if he wanted to.
Where investors are more divided, it seems, is on what happens beyond September. This week’s webinar audience was roughly equally split three ways in expecting either one, two or three cuts through the remainder of this year. We’re very much in the latter camp, looking for a slightly more rapid string of cuts than markets currently expect.
That’s it for this week, but if you missed our webinar on Tuesday, check out the highlights below or watch the full thing to your heart’s content here.