Fed Reserve:  Will Powell’s be replaced for ignoring Trump?


Above Photo - Federal Reserve Chair Jerome Powell Holds News Conference After Federal Open Market Committee Meeting
WASHINGTON, DC - MAY 01: Federal Reserve Board Chairman Jerome Powell speaks during a news conference on May 1, 2019 in Washington, DC. Powell said the Fed will not raise interest rates this quarter and no rate hikes are likely anytime soon. (Photo by Mark Wilson/Getty Images)

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Since assuming the presidency, a lingering quagmire for Donald Trump is understanding running the government is much different than running a closed private business.  The latest example is trying to dictate the actions of  Fed Reserve Board chair Jerome Powell.  Today the Fed rebuffed Trump’s constant badgering to lower the discount rate so that he could claim a political victory by deciding to keep them as-is, until the next meeting.

 

“we reviewed economic and financial developments in the United States and around the world and decided to leave our policy interest rate unchanged” Jerome Powell, Chair of Federal Reserve

 

The Federal Reserve is an august group of professionals charged with managing monetary policy through their Federal Open Market Committee (FOMC).  Their actions are non-partisan and usually free of any political influence.  That is, until Donald Trump came along.  The Fed rate is based on the economic environment.  As  a measure to thwart inflation the rate may increase based on positive economic metrics.

 

Some want it both ways

From a political standpoint Trump is enthusiastic to tout positive economic news.   Unfortunately, those like him dismiss the elementary notion of when and how the Fed rate moves.  For months, Trump has suggested to Powell to keep a lid on increasing the rate.  Not only is that type of communication unwise, it is unethical given the Fed’s core responsibility.  From a practical standpoint the Fed rate only declines based on a sliding economy.  If that were to happen it would contradict Trump’s proposition that all and any news from his administration is positive.

Recently two of Trump’s acolytes; Stephen Moore and Herman Cain had been suggested to join the Fed.  Their selection was fueled by their contempt of Powell’s fiscal leadership of the Board.  Just last week following protesting the criticism he received as being a nominee, Cain’s was abruptly dropped from consideration.  Likewise, Moore’s background has come under fire and it appears unlikely he can further survive the nomination process.  Interestingly, several weeks ago to Trump’s delight he applauded Moore for criticizing Powell’s leadership by penning a controversial opt-ed supporting a decrease in the Fed rate.

 

The next Fed monetary meeting is slated for June 18th & 19th.

Read Powell’s remarks HERE

Feds raise discount rate to 2.250%


Above caption.  Federal Reserve Chairman Jerome Powell Holds A News Conference Following Federal Open Market Committee Meeting
WASHINGTON, DC - SEPTEMBER 26: Federal Reserve Board Chairman Jerome Powell speaks during a news conference on September 26, 2018 in Washington, DC. The US Federal Reserve raised the short-term interest rates by a quarter percentage point on Wednesday, the third increase of the year, and signaled two more hikes were coming in 2018 and four in 2019. (Photo by Mark Wilson/Getty Images)

CHICAGO, IL – SEPTEMBER 26: Traders monitor offers in the S&P options pit at the Cboe Global Markets exchange shortly after the Federal Reserve announced it was raising interest rates on September 26, 2018 in Chicago, Illinois. The Fed agreed to increase the federal funds rate a quarter percentage point, to a range of 2% to 2.25%. (Photo by Scott Olson/Getty Images)

[Washington, DC]   In a move that was forecast several weeks ago, this afternoon Jerome Powell, chairman of the Federal Reserve raised the discount rate to 2.250%.  This move occurred to the chagrin of his boss and the person who appointed him Donald Trump,  as since June of this year he has been quite vocal that Powell should not raise rates.

The Feds are non-partisan and to effectively operate are independent of political interference.  As customary,  president’s and those in leadership refrain from making comments about monetary policy.  That is most, except Trump who once again has demonstrated his lack of understanding  regarding political protocol.

 

“I’m not thrilled,” Trump said in an interview last month

 


Powell has stood firm and justified the move to control a positive economy.  The discount rate is the cost commercial banks pay for funds.  Their impact does not immediately affect consumers but they typically result in higher borrower costs.

 

You can’t have it both ways

 

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2 to 2-1/4 percent.  Jerome Powell, Fed Chairman

 

Ever since the financial meltdown of 2008, systemic changes were adopted to strengthen the economy.  In Trump’s case, even though it is very tough for him to admit he inherited an economy that had all the signs of positive growth, as a practical measure it must be properly managed.  As the economy moves forward, it is the Fed’s who are in control of monetary policy and to manage interest rates so that inflation of other negative factors are mitigated.

The nine member panel of the Federal Reserve Open Market Committee voted unanimously to support the increase.

Here is Powell’s full report to the media.

Janet Yellen:  time to move on


Today, Donald Trump appointed Jerome Powell as the next chair of the Board of Governors of the Federal Reserve system (Fed) replacing Janet Yellen.  The announcement was expected as Powell must now prepare himself to go through the gauntlet called confirmation.  Since he is already part of the board there should be no surprises and he is expected to be in place when Yellen’s term ends in February.

“I congratulate my colleague Jay Powell on his nomination to be Chairman of the Federal Reserve Board. Jay’s long and distinguished career has been marked by dedicated public service and seriousness of purpose. I am confident in his deep commitment to carrying out the vital public mission of the Federal Reserve. I am committed to working with him to ensure a smooth transition.” Janet Yellen, 11/2/17

 

Yellen was appointed as chair by President Barack Obama in 2014 and her term officially ends February 3, 2018.

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Prior to taking over the chair’s functions she was second in command under then Fed chair Ben Bernanke.   Many in the financial sector applaud her tenure as being a steady force in guiding the United States monetary policy.  Even though the position is supposed to be non-partisan, her primary criticism came from those on the opposite side of President Obama who took fault with anything and everything he proposed.  Yet, like most things history has the final say and the economy is in much better shape as she exits – stage left!

Not fake news

Her critics and several others have short memories or blatant amnesia as they forget about a decade ago, the United States economic condition was becoming quite perilous and eventually exploded in 2008 resulting in hardships for millions of citizens and people around the globe.  It was through focus and commitment that Bernanke and his team as well as the leadership of President Obama who accepted the daunting task of stabilizing the markets.  The rest is history and the residual effect is an economy which has regained its footing, including a stock market which has grown to unprecedented levels.

Fed rate remains unchanged

Yesterday the Fed’s Monetary Committee met and decided to maintain the fed discount rate, although it is still projected to increase before the end of the year.  The concern conveyed by members was acknowledgment the economy is moving is a positive direction.

As Yellen is preparing to move on the one concern being voiced is the GOP’s proposed tax reform bill.  Monetary policy is a methodical process and it takes extreme discipline to not allow partisan politics to be the guiding force to ensure normalization.

 

“That task could be complicated  by the GOP plan to inject huge stimulus into an already-healthy economy. Doing so may force the Fed to more aggressively raise rates to prevent the economy from overheating. “