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It stinks to be Powell this week as Fed chairman grapples with Trump’s ire

Trump tweets Powell and other FOMC members "don't have a clue"

Federal Reserve Chairman Jerome Powell will answer questions from reporters following the end of Wednesday’s policy-setting FOMC meeting that’s widely expected to produce a 0.25% rate cut. 

Watch out: The last time Powell held a press conference, after July’s FOMC meeting, he used two words that spooked investors, cratered the stock market and wiped out billions of dollars of value. The U.S. dollar hit a more than two-year high and bond yields spiked. 

It all happened on July 31, when Powell described the first cut since the Great Recession as a “midcycle adjustment,” which Fed-watchers and investors parsed to mean he did not intend to be aggressive with future reductions. It was one of the biggest reactions to a Fed chairman’s utterance since Alan Greenspan used the words “irrational exuberance” in 1996, crashing markets around the world.

So, you know it’s got to be tough to be Powell this week. In addition to trying to avoid cratering markets, he’s being badgered by the leader of the free world. President Donald Trump, who nominated Powell to head the Fed last year, recently called him a “bonehead” and an “enemy” of the U.S., compared him to Chinese President Xi Jinping and asked, “Where did I find this guy?” 

On Monday morning, Trump said Powell and his colleagues “don’t have a clue” and demanded a “big” drop in interest rates on Wednesday – an edict Powell, who has 11 other FOMC members who also get a vote, seems unlikely to deliver. Traders in futures markets have signaled a 66% probability of a 0.25% cut, putting the target rate at 1.75% to 2%, according to CME’s FedWatch tool. That’s a long way from Trump’s oft-stated desire for zero or negative interest rates. 

Trump’s criticisms and rate demands weren’t delivered sub rosa, as previous U.S. presidents have vented. They were tweeted to Trump’s more than 64 million social media followers. U.S. presidents traditionally refrain from out-loud criticism of the Fed to avoid eroding the FOMC’s credibility, which might influence its ability to set monetary policy.

The president’s hostility toward his Fed chairman has reached such a point that Powell was asked during Congressional testimony on July 10 what he would do if Trump fired him. Powell told the House Financial Services Committee he wouldn’t leave his post as the nation’s top central banker even if ordered by Trump.

“The law clearly gives me a four-year term and I fully intend to serve that,” said Powell, who makes an annual salary of $203,500 as head of the Fed. While that’s an enormous sum to most American workers, it’s a fraction of what Powell would earn if he returned to one of his prior jobs at Wall Street firms or think tanks.

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