The Fed defies Trump, elects to 'pause' rate cuts
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The US Federal Reserve (the Fed) [link] declined to make any changes to interest rates at its January meeting yesterday, despite President Trump’s “demand” during an interview that the Fed cut rates “immediately”. Discussing its decision, the Fed noted that unemployment “has stabilized at a low level”, and that “inflation remains somewhat elevated.” The move to keep rates steady was in line with investor and analyst expectations, and marks the first time in four meetings that the Fed has refused to issue a rate cut. When asked about President Trump’s “demands”, Fed Chairman Jerome Powell said that he has had “no contact” with the President and said that “the public should be confident that we will continue to do our work... keeping our heads down.” President Trump responded to the pause angrily: “Because Jay Powell and the Fed failed to stop the problem they created with inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing.” Trump blamed the inflationary spike on the Fed’s alleged focus on “DEI, gender ideology, ‘green’ energy, and fake climate change.”
MB bottom-line: Trump is an idiot, but he’s a powerful idiot, and that’s what makes him dangerous in terms of financial certainty. As an observer, it’s hard to extract the “red meat” bluster for his fans from the signal about what he actually plans to do. If you remember his first term, he said a whole pile of things that he never did or never seemed to care about again, but he also said a handful of things in that same manner that did actually come to pass or that he was actually quite passionate about. He revels in how it makes him look to tear down Chesterton’s Fence without giving it a second thought. Most of what he mentioned in response to the Fed’s pause were things that he seemed like he was already planning to do, so maybe it was just one of those “better to seem angry and alpha than silent and sane” type of moments for him.
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