Powell needs to "square off" now with our executive branch bully and stay on as long as allowed in order to prevent further mindless tampering for political gain. The only precedent now is for Powell to create his own and stand his ground as the "adult in the room." Trump has no future, and feeble attempts from "on high" to bring the Fed. to heal need to be stopped now, by an unapologetic, unrepentant Powell.
I have no problem with him staying on . He was no worse than most of the Fed chairs . Not many had to deal with the “ madness of crowds “ during Covid .
As long as we are looking for an “ adult in the room “ , I’m still looking for one during Covid . Jay Battachara stands out but they silenced him .
Extremely insightful, as always, Claudia, and a great reference. Thank you!
I share the concern in the adjoining comment about whether charges against Powell will be resuscitate in the future. Given that Trump has been deemed untrustworthy domestically and on the global stage, that concern is highly relevant.
Excellent analysis of Warsh's preference for PCE Trimmed Mean and PCE Median to measure progress getting back to the 2% inflation target. And, thanks also for the references to Waller and Warsh's statements that they would not vote to fire Fed regional presidents. Valuable information that I had not seen in other coverage of Fed issues.
Thanks for looking into what actually has been discussed in the hearing, it's very rare in the media.
As for 'forward guidance', I'm a bit surprised how vehemently Warsh rejected it. It's so broad that pretty much any sensible policy fits with this term. Especially since actors on this field generally are independent so that you need agreements you'll only get with the trust of those actors.
I'm thinking of how Trump always wants to "surprise" everyone else and considers that smart. Will this be a role model for Warsh? Or would work even worse for the fed than it does for Trump generally.
I don’t remember “ forward guidance “ in the 70’s ,80’s ,90’s ..I remember on CNBC Mark Hayes , David Faber ,and Joe Kernan trying to. Divine what might happen on Fed day by the way Greenspan carried his briefcase .
Also if I am not mistaken Volcker raised the Fed funds rate 100 bps on a Sunday night so no one knew what the rate was until Monday morning. Not much “ guidance “ back then .
Powell's position on resignation - non-resignation in this case - seems to flow from a quite reasonable assumption that the Trump administration cannot be trusted to stop persecuting him and other colleagues, like Ms. Cook.
As always, thanks for the clear discussion of the issues.
Straight from central casting - for The Twilight Zone.
Forward guidance has been a critical part of the Fed's credibility, and Warsh wants to just drop it? Apparently, Warsh doesn't believe the Fed's credibility is of any importance.
"Maybe Warsh’s criticism could be an opening for innovation". I wouldn't bet on it.
I hope Powell does stay on as a governor. It won't prevent Trumpkopf from seizing a majority, but it will defer that moment. We need to delay all of Trumpkopf's depredations as much as possible.
Why believe them? Trump appointees have habitually lied. Seems reasonable to assume this one is also a liar. If fighting an attempt at autocracy then fight it whenever and wherever you can. If you don’t you lose your country.
The fed is different though. Erdogan has shown that it doesn't really help a dictator to have a central bank doing his bidding.
We certainly should keep Trump's secretive nature in mind. He prefers to not talk as long as he can avoid it not the least because gritting depends on keeping the victim in the dark. He surely has chosen Warsh with this on his mind.
Correct . Trump wants “ interest rates “ down but that’s as far as it goes . Wait until he sees the ten year rate if Warsh drops the Fed funds rate and starts selling off bonds .
There is one other item I have heard in favor of Powell staying on the Board.
The claim is that as a member of the Fed his legal fees for Fed related actions are covered.
I don't know if that is accurate. If it is, the question for Powell is whether he trusts the current Justice department to not reopen the bizarre investigation.
(Add/edit : Presumably this is part of standard indemnification language, but the devil is in the details. Frequently after a target leaves an organization, the legal resources focus on reducing the organization's liability, not protecting the former board member.)
Let me know when I can ride it non stop from SF to LA in 2 hrs 40 minutes like it says in the original 2008 Municipal bind prospectus .which I still have .
Non -stop CJ …let’s put “ silly “ in perspective OK ?
It is true that we avoided a 1930’s depression in 2008 . Lloyd Blankfein ,John Mack et al most certainly did . So did I , since my S&P 500 fund is now up 1000%. since 2009 .
Yet , my mother in law lived her remaining years with a .025% CD rate .
When her husband died he left her 600k . Before the 2008 Debacle she could get 5% or 30k year , then suddenly she had to make do on about $1500/ yr .
The flip side of the Fed policy was great wealth disparity.
I think the jury is still out on 2008 . Remember “ Occupy “ , “ Tea Party “ ?
I wonder how GenZ feels about things . They have no recollection of 2008 but they live with the consequences.
Thank you for this explanation. Times are hard right now and the"in comings" are so fast and furious it helps to have someone explain and get down into the weeds.
On my last note, MAY DAY ECONOMIC BOYCOTT (see 50501, Mobilize, Indivisible) Flexing our econ muscles to say ENOUGH!)
i agree that unconventional mon pol is being rolled back: BS and FG
and the implications of this is the withdrawal of the fed put
warsh is clearly political "the state has over-reached" + trump pressures fed = fed is no longer independent
i think we should be honest about the drawbacks though: QE where the reverse is QT not selling assets is a permanent expansion of the balance sheet and enables the government to spend at a lower price than the market mechanism would point too. Plus FG is no longer needed given where rates are. Most of the time the Fed distance themselves from the SEP (so don't use it...?) and it creates an environment where lots of fed meetings are no longer genuinely live (at least it looks like that from the outside)
I think the main implication of this is the removal of fed put (QE) in difficult times (a "let them suffer" approach that right wing voters take even here in the UK !!) > but trump will not like that at all. TACO is there for a reason!!
I wonder what the evidence would look like to show that tariffs were responsible for pretty much a one-time increase in prices. Maybe a narrowing of the spread between core and trimmed core? But, would this require tariff refunds to importers to somehow trickle down to consumers? An interesting hypothesis, perhaps, but I sure wouldn’t want to bet the farm on it coming to pass.
Powell needs to "square off" now with our executive branch bully and stay on as long as allowed in order to prevent further mindless tampering for political gain. The only precedent now is for Powell to create his own and stand his ground as the "adult in the room." Trump has no future, and feeble attempts from "on high" to bring the Fed. to heal need to be stopped now, by an unapologetic, unrepentant Powell.
I have no problem with him staying on . He was no worse than most of the Fed chairs . Not many had to deal with the “ madness of crowds “ during Covid .
As long as we are looking for an “ adult in the room “ , I’m still looking for one during Covid . Jay Battachara stands out but they silenced him .
Clear, insightful analysis for a non-economist.
You have put my mind at ease a little bit. I was aways in favor of Powell staying to safeguard the Fed from "tRumpism" ignorance.
Extremely insightful, as always, Claudia, and a great reference. Thank you!
I share the concern in the adjoining comment about whether charges against Powell will be resuscitate in the future. Given that Trump has been deemed untrustworthy domestically and on the global stage, that concern is highly relevant.
Excellent analysis of Warsh's preference for PCE Trimmed Mean and PCE Median to measure progress getting back to the 2% inflation target. And, thanks also for the references to Waller and Warsh's statements that they would not vote to fire Fed regional presidents. Valuable information that I had not seen in other coverage of Fed issues.
Thanks for looking into what actually has been discussed in the hearing, it's very rare in the media.
As for 'forward guidance', I'm a bit surprised how vehemently Warsh rejected it. It's so broad that pretty much any sensible policy fits with this term. Especially since actors on this field generally are independent so that you need agreements you'll only get with the trust of those actors.
I'm thinking of how Trump always wants to "surprise" everyone else and considers that smart. Will this be a role model for Warsh? Or would work even worse for the fed than it does for Trump generally.
I don’t remember “ forward guidance “ in the 70’s ,80’s ,90’s ..I remember on CNBC Mark Hayes , David Faber ,and Joe Kernan trying to. Divine what might happen on Fed day by the way Greenspan carried his briefcase .
Also if I am not mistaken Volcker raised the Fed funds rate 100 bps on a Sunday night so no one knew what the rate was until Monday morning. Not much “ guidance “ back then .
Powell's position on resignation - non-resignation in this case - seems to flow from a quite reasonable assumption that the Trump administration cannot be trusted to stop persecuting him and other colleagues, like Ms. Cook.
As always, thanks for the clear discussion of the issues.
Spot on.
Straight from central casting - for The Twilight Zone.
Forward guidance has been a critical part of the Fed's credibility, and Warsh wants to just drop it? Apparently, Warsh doesn't believe the Fed's credibility is of any importance.
"Maybe Warsh’s criticism could be an opening for innovation". I wouldn't bet on it.
I hope Powell does stay on as a governor. It won't prevent Trumpkopf from seizing a majority, but it will defer that moment. We need to delay all of Trumpkopf's depredations as much as possible.
Why believe them? Trump appointees have habitually lied. Seems reasonable to assume this one is also a liar. If fighting an attempt at autocracy then fight it whenever and wherever you can. If you don’t you lose your country.
The fed is different though. Erdogan has shown that it doesn't really help a dictator to have a central bank doing his bidding.
We certainly should keep Trump's secretive nature in mind. He prefers to not talk as long as he can avoid it not the least because gritting depends on keeping the victim in the dark. He surely has chosen Warsh with this on his mind.
I doubt Trumpkopf will take the lesson of Erdogan to heart. Learning from others' mistakes - much less his own - just isn't his style.
Trump never learns, I said it to remind others who might have missed it or forgotten about it.
Correct . Trump wants “ interest rates “ down but that’s as far as it goes . Wait until he sees the ten year rate if Warsh drops the Fed funds rate and starts selling off bonds .
If you are in DC and your lips are moving ..you are lying .
Fealty to The Orange Führer above all else.
There is one other item I have heard in favor of Powell staying on the Board.
The claim is that as a member of the Fed his legal fees for Fed related actions are covered.
I don't know if that is accurate. If it is, the question for Powell is whether he trusts the current Justice department to not reopen the bizarre investigation.
(Add/edit : Presumably this is part of standard indemnification language, but the devil is in the details. Frequently after a target leaves an organization, the legal resources focus on reducing the organization's liability, not protecting the former board member.)
Powell and Cook have to cover their own legal fees. They can’t use Board legal.
Thanks for the informed response!
And eek!!
Even the minor boards I've been involved with included broad indemnification.
Unlimited legal liability is a pretty scary thing given the broad impact of Fed decisions.
The whole thing is weird . Powell was not responsible for the construction. He was not getting kickbacks etc.
The cost overruns was “ business as usual “ in DC .
In fact , he got a bargain .
Here in California we spent 30 Billion for an overpass in Fresno . No rail to or fro . Just an overpass .
Yes, but your last paragraph is wrong.
https://hsr.ca.gov/communications-outreach/reports/
A lot more than one overpass is done, and complaining that an unfinished project isn't complete is pretty silly.
Let me know when I can ride it non stop from SF to LA in 2 hrs 40 minutes like it says in the original 2008 Municipal bind prospectus .which I still have .
Non -stop CJ …let’s put “ silly “ in perspective OK ?
So that would be a fact, and a completely reasonable complaint.
Nothing silly about it.
You don't need to make things up about the Cal HSR.
Be better.
It is true that we avoided a 1930’s depression in 2008 . Lloyd Blankfein ,John Mack et al most certainly did . So did I , since my S&P 500 fund is now up 1000%. since 2009 .
Yet , my mother in law lived her remaining years with a .025% CD rate .
When her husband died he left her 600k . Before the 2008 Debacle she could get 5% or 30k year , then suddenly she had to make do on about $1500/ yr .
The flip side of the Fed policy was great wealth disparity.
I think the jury is still out on 2008 . Remember “ Occupy “ , “ Tea Party “ ?
I wonder how GenZ feels about things . They have no recollection of 2008 but they live with the consequences.
Thank you for this explanation. Times are hard right now and the"in comings" are so fast and furious it helps to have someone explain and get down into the weeds.
On my last note, MAY DAY ECONOMIC BOYCOTT (see 50501, Mobilize, Indivisible) Flexing our econ muscles to say ENOUGH!)
Yes! It's imperative that we continue to Rise! Resist! ✊✊✊
i agree that unconventional mon pol is being rolled back: BS and FG
and the implications of this is the withdrawal of the fed put
warsh is clearly political "the state has over-reached" + trump pressures fed = fed is no longer independent
i think we should be honest about the drawbacks though: QE where the reverse is QT not selling assets is a permanent expansion of the balance sheet and enables the government to spend at a lower price than the market mechanism would point too. Plus FG is no longer needed given where rates are. Most of the time the Fed distance themselves from the SEP (so don't use it...?) and it creates an environment where lots of fed meetings are no longer genuinely live (at least it looks like that from the outside)
I think the main implication of this is the removal of fed put (QE) in difficult times (a "let them suffer" approach that right wing voters take even here in the UK !!) > but trump will not like that at all. TACO is there for a reason!!
The Fed put lives on .
“ there is nothing so permanent as a temporary government program “
I wonder what the evidence would look like to show that tariffs were responsible for pretty much a one-time increase in prices. Maybe a narrowing of the spread between core and trimmed core? But, would this require tariff refunds to importers to somehow trickle down to consumers? An interesting hypothesis, perhaps, but I sure wouldn’t want to bet the farm on it coming to pass.
This research note, which I cited, is a good starting place for how that analysis will be done: https://www.federalreserve.gov/econres/notes/feds-notes/detecting-tariff-effects-on-consumer-prices-in-real-time-part-II-20260408.html.