Is the Powell Put back?

Is the Powell Put back?

The S&P 500 gained more than 4% for this week. Some of that was the result of talk from the White House about possible tariff negotiations with China.As the week wore on, though, attention shifted from tariff talk to comments from Federal Reserve officials that seemed to suggest that the central bank might consider cutting interest rates as early as its June meeting if economic growth slowed. Yep, the Powell Put is back. In this scenario, bad earnings and bad economic news become good news because they push the Federal Reserve closer to cutting interest rates.

Trump: Powell’s “termination cannot come fast enough”

Trump: Powell’s “termination cannot come fast enough”

One day after Fed Chair Jerome Powell warned that the administration’s trade war was “highly likely” to spur a temporary rise in inflation with the potential for longer-lasting effects President Donald Trump blasted the Federal Reserve for not lowering interest rates and said its chair’s “termination cannot come fast enough.” “Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’” Trump wrote on Truth Social. Referring to interest rates, he added: “He should certainly lower them now. Powell’s termination cannot come fast enough!”

Is the Powell Put back?

Treasury auction today better than expected

Today’s U.S. Treasury auction of $39 billion in 10-year notes went better than expected despite recent volatility in the bond market. That lessened my worry about a potential tightening of liquidity in the critical Treasury market.

Please watch my new YouTube video: Why the Fed is almost certain to be wrong

Please watch my new YouTube video: Why the Fed is almost certain to be wrong

Today’s video is Why the Fed is Almost Certain to be Wrong. Blame it in lags. Lags make economic forecasting really difficult at the best of times. How long does it take policies like tariffs and tax cuts to actually affect the economy and show up in the data? Right now, we’re dealing with lags from a tariffs that will eventually raise consumer prices. We don’t know when this will hit people in the wallet and really start to affect the economy as a whole. Another problem is the upcoming Trump tax cuts. This will be stimulative to the economy and the Fed may have to look at raising rates again in effort to slow more inflation. If, however, the tariffs slow the economy enough to balance out the stimulative effect of the tax cuts, the Fed would look at lowering rates. There’s really little that monetary policy can do about tariff-caused price increases. White House accounting says the tariffs and tax cuts will balance each other, but it’s tough to say if the money coming out of consumer pockets are the same pockets benefiting from the tax cuts. All this to say, the Fed remains between a rock and a hard place, and has little chance of getting this right and will almost certaInly make a mistake. The question is, How big will the mistake be?

Trump criticizes the Fed’s decision to hold interest rates steady

Trump criticizes the Fed’s decision to hold interest rates steady

That didn’t take long. Wednesday afternoon the Federal Reserve decided to keep its benchmark interest rate steady–no rate cut. Wednesday night President Donald Trump renewed his call for the Federal Reserve to lower interest rates as he criticized the central bank’s decision. “The Fed would be MUCH better off CUTTING RATES as U.S.Tariffs start to transition (ease!) their way into the economy,” Trump wrote on Truth Social. “Do the right thing.” Trump added: “April 2nd is Liberation Day in America!!!” President Trump’s criticism of the Fed’s decision certainly isn’t a surprise.

Trump: Powell’s “termination cannot come fast enough”

Friday’s trade makes it clear what market fears: an economic slowdown

Just minutes after a slide that drove the S&P 500 down over 1%, the gauge staged an “oversold bounce” after Federal Reserve Chair Jerome Powell told a New York audience that the economy is fine. “Despite elevated levels of uncertainty, the US economy continues to be in a good place,” Powell said at an event Friday in New York hosted by the University of Chicago Booth School of Business. “We do not need to be in a hurry, and are well positioned to wait for greater clarity.”

Is the Powell Put back?

Bond traders move to price in just one interest rate cut in 2025

Bond traders pushed out bets for the next Federal Reserve interest-rate cut to December on today’s increase in the CPI inflation rate. Swap contracts linked to future Fed decisions had before today anticipated a rate cut by September. Today’s swap pricing implies just one quarter-point cut this year. The yield on benchmark 10-year Treasury closed the day up 9 basis points to 4.62%%. Two-year Treasury yields, more sensitive than longer-maturity debt to Fed rate moves, rose by 7 basis points to 4.35%. “How can anyone justify any rate cuts with such inflationary pressure?,” Roger Landucci, a partner at Alphamatrix Finance in Geneva, told Bloomberg.

Oh, no! CPI inflation edged higher in January

Oh, no! CPI inflation edged higher in January

CPI inflation rose by more than expected in January, as prices for groceries, housing and energy all picked up. The headline, all-items Consumer Price Index rose by 3.0% in January from a year earlier, the Labor Department reported Wednesday morning. That’s slightly above the 2.9% annual rate reported in December. The core index, which strips out volatile food and energy prices, was also higher, showing a 3.3% annual rate.