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Political pressure on Powell is heating up. The Fed chairman has a plan for this.
A new wave of political pressure greeted Federal Reserve Chairman Jerome Powell and his colleagues when they met in Washington this week to discuss the direction of interest rates.
From the right, Republican presidential candidate Donald Trump again raised the prospect of ousting Powell from his job. “I know a lot about firing people,” joked the former president in an interview with a TV station in Arizona.
From the left, the comment came in the form of two new cards from liberal lawmakers calling on Powell to immediately lower interest rates. One letter, led by Senator Elizabeth Warren, concluded by telling the central banker: “You have kept interest rates too high for too long.”
But the political noise may have a limited impact, at least this week. This is partly due to the limited influence these politicians hold at this time, but also largely due to Powell’s own design.
The central banker has long set “data-driven” benchmarks (and tried to strictly adhere to them) for avoid the fate of predecessors considered too susceptible to changing political winds.
Powell claims his sole focus is on things like a strong jobs report last week as well as another inflation chart due on Wednesday morning.
Federal Reserve Chairman Jerome Powell looks on during a Financial Stability Oversight Council session at the Treasury Department on May 10. (ANDREW CABALLERO-REYNOLDS/AFP via Getty Images) (ANDREW CABALLERO-REYNOLDS via Getty Images)
Desmond Lachman describes this as a strategy of essentially painting yourself into a corner – intentionally.
“Given the way he’s set this up, the bar will now be very high for him to cut interest rates before the election,” said Lachman, a former managing director at Salomon Smith Barney now at the American Enterprise Institute.
“That’s really the box he put himself in,” Lachman added.
There is also little these critics can do at the moment. Trump has made it clear that if he wins, Powell will be unemployed no matter what he does, but the question is whether Trump would take the destabilizing step of firing him or simply let his mandate expire.
Mark Spindel, chief investment officer at Potomac River Capital and Fed historian, notes that both President Joe Biden and Powell would welcome the declaration of a soft economic landing, but Powell is fully committed to waiting for a consensus on the data.
“I don’t think Jay wavered in what he wanted to do, but I don’t think he wanted to get ahead of himself,” Spindel said, adding, “Certainly the window to offer political accommodation is before the election. . It’s closing fast.”
See more information: How much control does the president have over the Fed and interest rates?
The story continues
Trump’s continued pressure campaign
The Fed is widely expected to keep its rates at a 23-year high on Wednesday, meaning there will be no near-term relief from high borrowing costs.
These high costs – especially for getting a mortgage – are why many in the political world are pushing for faster action by the Fed to lower rates.
Housing is the reason the person questioning Trump last week — ABC15 Arizona’s Rachel Louise Just — raised the issue of monetary policy during her stop in Phoenix. Trump focused on interest rates and energy prices, saying: “With me, they are going down, interest rates are going down, energy is going down.”
But Trump refused to be more specific about Powell even after repeated questions, saying he would “do whatever it takes to make America great again.”
Former President Donald Trump speaks during a town hall on June 6 in Phoenix, Arizona. (Justin Sullivan/Getty Images) (Justin Sullivan via Getty Images)
Trump has said previously, as in a 2020 press conferencethat “I have the right to remove” Powell and also signaled that he would attack any move to lower rates before the election as a political move by Powell to help Biden.
And a recent Wall Street Journal report found that Trump’s allies had written a proposal that could seriously undermine the Fed’s independence and give the president a direct say in setting interest rates.
But for now, Spindel says Trump’s attacks are unlikely to change Powell’s behavior. The former president is already floating possible successors for Powell.
“I think a lot of what Trump’s attacks do undermine the integrity and credibility of the institution,” Spindel says.
Pressure from the left
Influential Democrats on Capitol Hill are also increasing their pressure with new letters to Powell.
The first it came from Democratic Senators Warren, Jacky Rosen and John Hickenlooper. The second it came from Sen. Sheldon Whitehouse, chairman of the Budget Committee, and Rep. Brendan Boyle, the top House Democrat on the issue.
Both focused heavily on housing costs while advocating to Powell to lower rates now.
“America also currently faces a housing supply crisis,” Whitehouse and Boyle wrote, continuing, “high interest rates exacerbate this supply crisis, increasing the costs of developing new housing while discouraging existing homeowners from upgrade to bigger houses.”
The case of Biden’s allies – which was repeated by a series of figuresincluding at least one former economic advisor to Trump – is that high interest rates make the inflation problem worse when it comes to housing.
Senator Elizabeth Warren (D-MA) speaks during a Senate hearing in January. (Kent Nishimura/Getty Images) (Kent Nishimura via Getty Images)
“It’s becoming a vicious cycle where Chairman Powell attacks the housing market and comes back again and says we need more data,” charged Bilal Baydoun, director of policy and research at the left-leaning Groundwork Collaborative.
Baydoun says Powell needs to change course, but worries that won’t happen because of politics and “the fear of being seen as someone who is tipping the scales.”
Biden was more cautious, but also commented on the Fed in the context of real estate. “I bet that little device that sets interest rates is going to go down,” Biden said in a March speech while discussing mortgages.
It’s a prediction he repeated several times in the following months.
See more information: What the Fed’s Rate Decision Means for Bank Accounts, CDs, Loans and Credit Cards
Chances of a ‘very boring’ June meeting
Powell may be able to stay out of the political fray this week, but it could become a more difficult task as the summer progresses.
Morningstar US chief market strategist David Sekera told Yahoo Finance in a live interview this week that the meeting could be “very boring” but a rate cut in the run-up to the September election is still a possibility .
“I think they will want to give that indication to the market at the July meeting,” he said.
Traders are currently projecting the chances of a rate cut before Election Day as essentially a coin toss. A tool that projects the trader’s vision, as of Tuesday afternoon, projects a 49% chance that there will be no flexibility between now and the September meeting.
The story is different when it comes to the end of the year, with traders projecting a nearly 87% chance of some easing before the start of 2025.
Lachman predicts Powell will let in as little political noise as possible when he speaks to reporters this week.
“I think he will ignore that” and instead focus on the technical aspects of the Fed’s work, he said. “He’s very skilled at that.”
But how Powell explains his position when it comes to the housing market will likely be closely scrutinized in the coming months.
Baydoun says Powell “needs to explain” his approach to this issue. He adds that housing is fundamental to how Americans view their future and “I’m quite confident that frustration over housing in particular will lead to greater scrutiny.”
Correction: An earlier version of this article misstated Rachel Louise Just’s name. We regret the error.
Ben Werschkul is the Washington correspondent for Yahoo Finance.
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The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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