Jerome Powell recently signaled the central bank was preparing to return to the business of cutting interest rates. This is all happening amid a backdrop of confusing economic signals. President Donald Trump is still railing against the Fed’s anything but reckless ways. This is why he has been advocating for much bolder changes to monetary policy. Just the other week, Trump doubled-down on his calls for lower rates, claiming that doing so would be a tremendous boon for the housing market.
Former President Donald Trump predictably weighed in from his Truth Social platform. He called for big cuts to interest rates, NOW, and BIGGER THAN HE HAD IN MIND. He argued that if we lowered the rates, the housing prices would just shoot up. HOUSING MUST RELIEVE @realdonaldtrump SENT!!!” he shouted, trying to get the Fed to act on his behalf. Trump’s pressure exacerbates the administration-Fed dynamic. Yet they are both struggling with the vagaries of U.S. economic policy.
In another positive political development, the Senate confirmed Stephen Miran to the Fed board. That vote was 48 to 27 Miran, special advisor to Trump, along with chair of the President’s Council of Economic Advisers. During his confirmation hearing, Miran stressed the importance of maintaining the Fed’s independence while supporting Trump’s vision for economic growth. He promised to protect this independence as he transitions into his new role at the Fed.
Even with these confirmations, the political landscape continues to be divisive. Cook, a current board member and USF economist, in recent months has been on the defensive against challenges to her seat. Cook denied any wrongdoing and asserted that Trump does not have the power to fire her from her position. U.S. District Judge Jia Cobb made a sweeping order. She concluded that Trump’s allegations of Cook’s mortgage fraud were insufficient legal basis to remove Cook. This decision allows her to continue doing harm at the Fed. Perhaps more importantly, it exposes the internal legal quagmire that surrounds appointments and dismissals at the agency.
He is currently suing the Federal Reserve and Trump. In response to calls for her firing, she asserts that her firing would be politically motivated due to her independence on monetary policy. The unfolding legal battle underscores the precarious relationship between appointees at the Fed and the political pressures exerted by the current administration.
Despite this surge in investments and major announcements, the economic indicators are a jumbled mess. In a busy macroeconomic climate where inflation continues to tick upwards, the latest telltale signals are pointing to a possible labor market freeze. These terms have resulted in a wait-and-see attitude from many policymakers as they look ahead to when they might raise rates again.