Gordon Gekko: Never. Although it was not the first time that a president attended the headquarters of the Central Bank, but the fourth. Franklin Roosevelt was the first, when the main building (today called Eccles) was inaugurated that is now in refaction. George W. Bush had been the last in 2006, assuming Ben Bernanke.
Q.: And, certainly, not to criticize it.
GG: Bush, like Gerald Ford, in their home visits, especially pondered the independence of the Central Bank. Both of the Congress and the President.
Q.: They were other times.
GG: Independence is a relatively recent idea. While the treasure and the Fed reached an agreement to establish a clear division of tasks in 1951, the interpretive interference did not disappear in the spot, but much later. In the 60s the short circuits of the Chairman William Mc Chesney Martin with Presidents Johnson and Nixon were notable. Nixon replaced him and put Arthur Burns instead, and imposed his influence, which ended very badly.
Q.: With double digit inflation. The story, of course, does not have to repeat itself. I imagine that will be the message of the meeting. And that Powell will emphasize him in the press conference. Monetary policy runs through a lane other than the preferences of political power.
GG: That is clear. It has been so until now. The doubt has to do with the vote behind the decision adopted. There will be at least a dissent. Governor Waller already anticipated his position. He wants a low -quarter preventive. That there is a dissent is not very common in the uses and customs of the Fed. That a Governor Discrepe happened only 4 times since 2000. The last time it also happened to Powell with Michelle Bowman in 2024. And perhaps Bowman repeats. Two dissidents of governors – they are seven, including Powell himself – should be taken as an omen about the outcome of the September meeting.
Q.: What if someone else appears? If they are three or more?
GG: It would be seen as a serious questioning of Powell’s driving. Like a riot on board.
Q.: Was it never happened?
GG: In the Bank of England it is not unprecedented for Chairman to lose a vote. And then, life continues peacefully. But, Fed has another tradition. And it is not because its members have always coincided and at all times. No, that would be impossible. But when voting, the differences are limited in advance and the position of the boss prevails as an overwhelming majority. In any case, at the next meeting, its position is modified and a consensual change occurs without visible cracks.
Q.: Given the extraordinary pressure Trump exerts publicly, a divided vote – and away from the modes that cultivates tradition – would sow the suspicion that Trump has managed to infiltrate his influence on the committee that defines monetary policy.
GG: The data does not justify the stir of an urgent move. So that interpretation would be difficult to deny.
Q.: Do you think Powell will have the necessary political waist to avoid an internal outburst and, in any case, if there is a new marked bearish bias, “telegraphy” a probable rate reduction in September?
GG: If it were the case, if there were more voices in favor of lowering the rate than at the June meeting (according to what the minutes revealed), that would be the neat solution, manual. Most likely there is a consensus in the convenience of taking more time. In September, the decision may be resolved having seen two more months of inflation and employment readings. A little earlier, even, towards the end of August, between 21 and 23, the Fed will celebrate its annual Jackson Hole symposium. There Powell could be explained with pleasure on the strategic vision of the Fed and advance the changes.
Q.: What did it do last year when he anticipated the first reduction of rates. That was very aggressive, half point of a stroke.
GG: As is. I would say that the novelty today should not be so what the Fed does but the treasure, considering the prominence that Trump and Secretary Bessent exercise in the border area between their fiscal responsibilities and those of the Central Bank.
Q.: What does it mean?
GG: Besent anesthetized the “vigilantes Bond” with the promise of biased the refinancing of the treasure towards the short -term letters. Today you must reveal the precise details. It will not be easy to fulfill the promise, because the quarterly debt issuance program is enormous. You have to place a little more than one billion dollars in new papers.
Q.: That is more than half of the fiscal deficit of the entire annual exercise.
GG: Yes, the box that was consumed because of the dispute for the “roof” of the public debt must be replenished.
Q.: If too much paper is distributed in short -term letters, can your absorption be complicated? Can short rates upload if there are difficulties in your digestion?
GG: Yes. That is why the formidable pressure on Powell is understood. If the Fed cuts the rates, that placement would be facilitated to a lower yield.
Q.: And if Besent chooses a more balanced mix in terms of deadlines, perhaps disappoint the bond holders and feed a leap of the long rates.
GG: The jump that one would have expected when the fiscal package was discussed, for example. However, Besent has a letter-comic to cushion a bad reception.
Q.: Which?
GG: The extra collection produced by the tariff rise. There were almost 23 billion dollars in May, and 27 billion in June. And march in rapid ascent. The placement menu could be reduced if the waters are agitated. Before Trump wants to spend the money.
Source: Ambito
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