Wouldn't cut rates at this point, says former Fed Governor Daniel Tarullo
Daniel Tarullo, former Federal Reserve governor and Harvard Law professor, joins 'Squawk Box' to discuss the attacks against Jerome Powell, what the Federal Reserve should be doing now and much more.
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Yahoo
36 minutes ago
- Yahoo
Trump has ramped up pressure on Fed Chair Powell to cut rates. There's one big reason it probably won't work.
Trump's pressure campaign on Fed Chair Powell probably won't work. Trump has bashed the Fed chair, and a report this week said he could announce his replacement early. But Powell will likely want to preserve the Fed's independence from politics, economic experts say. President Donald Trump has demanded Federal Reserve Chair Jerome Powell lower interest rates this year, but there's a big reason why his pressure campaign will probably prove futile. That's because Powell, who's 11 months away from the end of his term as central bank chief, is likely going to want to preserve his legacy and protect the Fed's independence, even as he faces withering criticisms from the president, according to economic experts. The president is reportedly considering announcing Powell's successor as soon as this fall, The Wall Street Journal reported this week, a move that could be read as trying to undermine Powell's influence before the end of his term next May. The president also took to Truth Social this week to call the central bank leader "too late" and a "very dumb, hardheaded person." Later, when speaking at a news conference on Thursday, Trump added that he believed Powell was "terrible" and "very stupid," and that the Fed Chair had "a very low IQ for what he does." David Rosenberg, a top economist and CEO of Rosenberg Research, told Business Insider he believed the insults Trump hurled at Powell this week were "self-defeating." If anything, they will make Powell less likely to cut rates, as the central bank chief will try to avoid creating the impression that the Fed is buckling under political pressure, Rosenberg said. "Donald Trump has shot himself in the foot," Rosenberg said. "Of course, Jay Powell, less than a year away from the expiration of his tenure, is going to want to preserve his legacy. And the Fed continues to feel some shame and a loss of credibility from inflation being transitory back in 2021 and 2022," he added, pointing to when the Fed brushed off rising inflation as a temporary phenomenon before embarking on a steep rate-hike cycle to combat it. In the past, economists have warned the Fed could damage its credibility by not remaining independent, something that could lead to higher inflation in the long run. The idea that Powell will remain focused on preserving the Fed's independence is a prominent narrative swirling in markets at the moment, according to Mohamed El-Erian, the chief economic advisor at Allianz. "That Chair Powell now is in love with the notion that his legacy will be protecting Fed independence," El-Erian said in an interview on CNBC on Thursday. "That will replace any concerns about the inflation surge we've had," he added. Forecasters also doubt rates will fall all that much, regardless of what Trump or Powell do. While Trump is likely to pick a more dovish successor to Powell, lowering interest rates will be harder than simply getting a new Fed chief, El-Erian said, as the new Fed Chair would need to come to a consensus on where the Fed funds rate should be with other central bankers. "It's not as straightforward as, 'I pick this person. By definition, rates are going to come down,'" he said. Jim Zelter, the president of Apollo Global Management, said he believes rates would likely stay higher in the short term. The US is still dealing with inflationary pressures in the supply chain and the job market, and economic benefits from AI and other tech advances are still far out into the future, he said. "I have a view that rates are going to be a little bit stickier and higher in the US than people think," Zelter said, speaking to Bloomberg this week. Investors grew more bullish on the prospect of rate cuts this week, but still don't expect the Fed to significantly reduce interest rates anytime soon. Markets are pricing in a 79% chance the Fed will keep rates steady at its July meeting, according to the CME FedWatch tool. Trump has feuded with Powell for years over lowering rates, but the president appears to be even more dogged in his attempts to spar with Powell and push for rate cuts this year, after promising Americans lower borrowing costs on the campaign trail. In April, Trump teased firing Powell before walking back those comments as markets balked at political meddling with central bank policy. In October, Treasury Secretary Scott Bessent — who is one of the contenders for the next Fed Chief, according to the Journal's report — also floated the idea of a "shadow Fed Chair." The shadow chair would be a Fed Chair announced before the end of Powell's term, who could indicate to markets what to expect after Powell is gone, Bessent told Barron's at the time. Zelter said he doubted Trump would follow through and announce a new Fed Chair extremely early. That's because Trump is in a convenient position right now to blame the Fed for things happening in the economy, Zelter said. Read the original article on Business Insider Erreur lors de la récupération des données Connectez-vous pour accéder à votre portefeuille Erreur lors de la récupération des données Erreur lors de la récupération des données Erreur lors de la récupération des données Erreur lors de la récupération des données
Wall Street Journal
4 hours ago
- Wall Street Journal
The Unlikely Stocks That Drove the Market to a Record High
It is easy to tell a simple story about the stock market at the moment. But it would be wrong. The simple story is Big Tech is back, baby! The Magnificent Seven went into a tailspin as tariffs, war and the spectacle of the president's coming close to firing the head of the Federal Reserve sent the world's biggest stocks plunging. But they have pulled out of their dive, and despite Friday's renewed trade tensions with Canada, both the S&P 500 and the Nasdaq made new highs on Friday. Boom!
Yahoo
15 hours ago
- Yahoo
Trump says he won't appoint anyone to Fed who doesn't back rate cuts
By Trevor Hunnicutt and Kanishka Singh WASHINGTON (Reuters) -U.S. President Donald Trump said on Friday he would not appoint anyone to head the Federal Reserve who would not lower interest rates from where they are, setting perhaps the most explicit litmus test yet for candidates to be the next central bank chief to align with his demands for steep rate cuts in order to get the job. "If I think somebody's going to keep the rates where they are or whatever, I'm not going to put them in," Trump said. "I'm going to put somebody that wants to cut rates. There are a lot of them out there." Presidents in the past have complained about the Fed setting interest rates too high for their liking, but Trump has taken it further than any recent U.S. leader in setting a clear expectation for whomever he nominates to be in line with his wishes. Trump, who said rates should be cut to 1% from the current Fed benchmark rate of 4.25% to 4.50%, has repeatedly railed against Fed Chair Jerome Powell for not lowering borrowing costs since Trump returned to the White House in January, and he did so again on Friday. "I'd love him to resign if he wanted to, he's done a lousy job," Trump, speaking at the White House, said, while also labeling the Fed chair as "stupid." After raising rates aggressively coming out of the pandemic to combat the largest inflation outbreak since the 1970s and 1980s, the Fed lowered them a bit in the second half of last year but has not cut them since Trump returned to office. That is largely because Powell and the large majority of policymakers are concerned Trump's tariff policies in particular may rekindle inflation, and they prefer to wait longer to see if that develops before lowering rates again. Fed officials themselves have penciled in half a percentage point of cuts later this year, although that is a fraction of the reduction Trump is demanding. Trump's latest rant against Powell comes as he has largely backed away from threats to try to fire the Fed leader after a recent Supreme Court opinion appeared to align with long-standing views that presidents cannot dismiss top Fed officials over policy disagreements. The protection is seen as central to the Fed's independence from political interference in policymaking, which is seen as a critical pillar of its credibility as the world's most influential central bank. Trump has since turned his focus more to a successor for Powell, whose term as chair expires in May 2026. He has in recent weeks said he has three or four potential candidates in mind and he would make a decision soon. Most past Fed chair appointments have typically been made roughly three or four months before the vacancy was scheduled. There are about 10 months remaining in Powell's tenure as chair, and an early nomination by Trump is seen as an effort to undermine Powell's authority by giving voice to a "shadow chair" who would advocate for a different policy trajectory. Treasury Secretary Scott Bessent, seen as one of the potential candidates to replace Powell, downplayed the "shadow chair" idea, however. "I don't think anyone's necessarily talking about that," he told CNBC. Bessent noted that just one seat on the Fed Board of Governors is scheduled to open up within the year when Governor Adriana Kugler's term expires in early 2026. While Powell's term as chair expires next May, he is not required to leave the Fed altogether until his board seat expires in 2028. That leaves Kugler's expected departure as the first opportunity for a Trump appointment. "So there is a chance that the person who is going to become the chair could be appointed in January, which would probably mean an October, November nomination," Bessent said. Asked about reports that he is among the pool of candidates, Bessent said: "I'll do what the president wants, but I think I have the best job in Washington." Others seen as possible nominees for the job are White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh, and current Governor Christopher Waller. Waller, appointed by Trump during the Republican's first term in office, in the past week has said he is open to cutting interest rates as soon as the Fed's next meeting at the end of July. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
