Powell signals caution on rates as Trump intensifies pressure ahead of election

Powell's Cautious Remarks: Inflation Risks Remain,The difference between primary dealers and secondary dealers Rate Cuts Still Awaited

Federal Reserve Chairman Powell, during his testimony to the Senate Banking Committee on Wednesday, noted that the new round of tariffs by the Trump administration may not immediately trigger sustained inflation but still requires close attention. He stated that the Federal Reserve wants to obtain more actual data on tariff levels and price transmission paths before making a decision on whether to cut interest rates.

Powell said, "If inflation remains controlled, there is indeed a possibility for earlier rate cuts, but we cannot ignore the secondary effects that tariffs might bring." He emphasized that acting too soon could incur long-term policy costs.

Trump Fires Again: Has Identified Three to Four Replacement Candidates

During Powell's testimony, President Trump again publicly criticized Powell as "terrible" between NATO summit sessions, stating he has identified 3 to 4 candidates to replace the Fed chair. Potential candidates reportedly include Walsh, Hassett, incumbent board member Waller, and Treasury Secretary Besent.

Waller is considered the strongest contender due to his public support for a rate cut in July. Analysts believe Trump might be hoping for a more aggressive monetary easing path in terms of policy.

Fed Internal Divisions Widen, Market Expects Rate Cut in September

According to the latest dot plot and official statements, there is a noticeable division within the Fed about when to start cutting rates. Board members Waller and Bowman lean towards action by July, while several regional Fed presidents, including Barkin, believe more observation is necessary.

The market currently anticipates that the Fed might begin cutting rates in September, with a high probability of no action in July. Federal funds rate futures indicate that a September rate cut has been fully priced in by the market.

Trump's Multiple Attacks on the Fed, Concerns Over Policy Interference Deepen

This is Trump's third severe critique of Powell in a week. On June 20, he mentioned "perhaps rethinking the decision not to fire Powell"; on Tuesday, he posted on social media that the U.S. should immediately cut rates by 2 to 3 percentage points, or risk missing economic growth opportunities.

Some analysts worry Trump might intervene in monetary policy through a "shadow chair" approach. Alliance Bernstein's chief economist pointed out that the key lies in whether the new appointee is seen as a political proxy and whether they would adjust their stance according to the president's will.

Inflation, Tariffs, Political Interference Intertwine, Fed Policy Faces Multiple Pressures

Amid the current situation, the Fed is facing increasing decision-making challenges in an environment where inflation expectations are unclear, and political interference continues to exert pressure. Powell faces internal policy divisions and external public opinion attacks; the trajectory of inflation data and trade policy in the coming months will be the core variables for monetary policy adjustments.

As the September meeting approaches, whether Powell can withstand the pressure and whether the Fed can maintain its independence is becoming the focus of global markets.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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