The Fed will keep its rates without changes. Trump knows. Little care. In its political spreadsheet, the fight is all gain. But what would happen if the administration managed to infiltrate a Trojan horse? Could it be that the bag rises more and more because a bubble is inflated?
The Bull market is on fire. And, Jerome Powell, entrenched in the Fed, too. They are very different fires. The burning bag thoroughly accelerates. The head of the Central Bank must, on the other hand, turn off the fire that President Trump feeds around him. Not to chamuside, and to prevent the independence of the Fed from being reduced to ashes. The discussion burns for the claim of the White House of a drastic (and urgent) reduction of interest rates. Trump, on Thursday, went to the Central Bank to repeat the claim before television cameras as well as demanding explanations for the cost overruns of his building refaction. The moment of the visit was from being casual. It was chosen with the almanac in mind. The monetary policy meeting is held this Tuesday and Wednesday. And Powell does not give the arm to twist.
What will the Fed do? Nothing. The institution does not attend to home orders. It will maintain its rates without changes in the range 4.25%-4.50%. Trump knows. Little care. In its political spreadsheet, the fight is all gain. Do whatever the Central Bank. When the Fed lowers the rates – as projects on its point map (and twice before the end of the year) – the president will say that his criticism is confirmed: Powell is the Lord too late. If the stabble economy – and records that Trump drives it months ago by a cornice path – its negative will be the scapegoat. And if inflation Corcovea – and delaying the pruning of rates is a success – will also be guilty. Or is it not your work to keep it at bay without departing from the goal of 2% (as it happens continuously since 2021)?
Meanwhile, Powell will be under extreme pressure. It is clear that Trump’s will is to submit to a saturation strategy (known in the trade as “Flooding The Zone”) that bombard it on all fronts. Will it resist? To the close ones, and the government emissaries, Powell tells them the same thing: he will stay in place until the last day of his mandate as head of the Fed (in May 2026). Rajataba, will preserve independent decision making.
Fed meeting: can a Trojan horse infiltrate?
In that sense, the meeting arouses an unknown. What would happen if the administration managed to infiltrate a Trojan horse? He who warns, does not betray. Governor Waller already pointed out that he will vote in favor of starting the loss of fees. And Governor Bowman anticipated that she is willing to consider it. Both were designated by Trump at the time (as well as Powell himself). A divided vote would not be per se a problem. But if it is a fierce porphy and it is defined by a narrow margin will break the tradition of the undisputed leadership of Chairman when setting the course, especially in critical situations. And although Powell prevails, the perception of independence will be undercover.
Trump Jerome Powell
The “On Fire” bag is a torch race that should illuminate the decision. Why should we lower the rates? What are the reasons? Governor Waller seeks to prevent before healing. Look at a slowdown in GDP growth (especially consumption) and in the creation of private employment. He fears a budding anemia that advises to stop on time. And he trusts that the increase in tariffs – if it is a permanent rise of 10% – will not move to a persistent elevation of inflation, given the stability of expectations. This week the national accounts will make light on the economic activity of the second quarter and the July labor report will also be known (although only two days after the conclave). But the stock market is an economic indicator of anticipation. It is sensitive to the concerns that Waller marks, and can guide. It is not infallible, but it is a better predictor, if you want, than the Fed forecasts themselves.
And what suggests your sprint of the week? In the last five wheels, the S&P 500 established five consecutive closures in records (and there are already 14 in the year). The Nasdaq added four. How close will a loss of economic vitality around? Participation in the Suba widely involving more sectors and papers. The Russell 2000 – the basket of shares of small companies – that marches to the tail of the Bull market, climbed almost 1% in the week and also joined the onslaught. How much does the idea that the Fed cut the rates influences? Future markets do not have it at the radar of this meeting and consider it 60% likely in September. A month ago, they estimated 75%. The rally accelerates, but it is not on horseback of the chances of a monetary relaxation, which move away. Could it be that the bag rises more and more because a bubble is inflated? If so, lowering the rates would inflame it even more. Finally, Waller discounts that the tariff regime already consecrated a universal tax of 10%, but Trump wants to take it to 15%. And in this last back of negotiation of reciprocal tariffs it reaps many other scattered increases. Thus, the new tariff structure is still a construction work that grows in height. It is reasonable, then, take more observation time.
The bag goes up and has its reasons
The bag does not climb because yes. Displays a positive agenda that is modestly covering its lockers. Trump has been hurry agreements – with Japan, Indonesia and the Philippines, this week – and perhaps soon with the European Union. The discussions are rough, but not because it opens up new dispute fronts. The claim is to quickly close the negotiations. What in April was a first leg, now it is exit. And that excites her. The health of the economy is another of its obsessions. And the first news of July are promising. The activity was considerably strengthened in the service area, according to the PMI report (which also records greater intensity in inflationary pressures). In parallel, corporate balances, adjusted expectations down beforehand, reveal that, beyond the burdensome ballast of tariffs, tariffs, Companies are raffling the juncture better than expected. The profits per share of the S&P 500 of the second quarter discounted an interannual advance of 4.4% two weeks ago. The banks passed and raised the rod to 5.6%. The last week passed and rose to 6.4%. Trumponomics do not seem to have sunk the economy in a recession or profitability in a bear marketalthough they have done a lot of damage. If Trump leaves trade alone, the profits would resume in 2026 the annual speed of two digits that dragged from the Biden era: 13.9%, according to the consensus of the analysts. In that context, monetary policy does not seem badly tuned in a dial that involves danger. Valuations, yes. The bag quotes 22.4 times the profits of the next 12 months. But it is a land that investors must define without having to depend on Trump or Powell. But it would not be more to learn from both and move more suspicious and with the helmet on.
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
