Someone else

The Fed left rates unchanged, on the basis that the economy is growing at a solid pace. According to the oficial statement, inflation remains elevated and unemployment is weak, but not weak enough to justify a cut. Stephen Miran, the latest governor appointed by Trump, voted in favor of another cut, signaling once again lack of consensus on the decision. But this is no news, as it was expected, the same way that rates were not expected to be lowered. The post rate decision roast about Powell by the president did not surprised anyone either. Two things stand out after the committee: (1) Powell and Trump seem to agree that the dollar weakness is not relevant for the economy at this point, and both appear to be unaffected by the rapid rise in gold. (2) despite the roast, Trump has not named Powell successor yet. In the chart below you can see the odds for the candidates we know, that Trump and Bessent have interviewed. We know that Trump likes to play around with nominations and wants to keep it suspenseful, but the “someone else” odds are picking up. No one seems to be dovish enough for the president, which seems to indicate that he would like someone he could call the day of the FOMC and “suggest” where rates need to be. In other words, he doesn’t want an independent Fed, he wants the power to control interest rates. That in itself it’s a regime change, and everything indicates it will happen.

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