00:00So these subpoenas were probably filed on Friday. The Fed could have easily just gone, you know what, we'll park this, we'll keep this under wraps, we're not going to tell anybody about it. No, that's not what they did.
00:08Sunday night bombshell. Powell's out. He's delivered this video message. He's come out swinging. He's accusing the administration basically of trying to bully the Fed into lowering interest rates because that's what it's trying to do elsewhere as well.
00:21And he doesn't pull any punches. This is an angry Fed chair. You can see that he is determined to make sure that he is going to be up for the fight.
00:31And we've now got a battle that is going to probably rage between the White House and the Fed for some time to come.
00:36Yes, the fact that the Fed has come out, that Jay Powell has come out and delivered this message tells you that he is clearly worried that the Fed independence is at risk.
00:46Do you see that as being a signal that he's more likely to stay on on the Board of Governors after his chairmanship ends?
00:52Who knows what he's going to do next? But you could certainly see it that way.
00:58So his term is going to come to an end. He can stay on the board until 2028, I think.
01:02That would obviously make it harder for the Trump administration to influence policy on the AFOMC.
01:09So if Powell is worried about Fed independence, that will be certainly something that would allow him to maybe exert more influence going forward and deny the Fed influence going forward.
01:20But in some ways, you could argue that this ship is already sailing.
01:24We're about to see – we've seen the Fed governors being kind of re-nominated.
01:27This process is underway. So actually, an avenue for the White House administration to change the mix on the AFOMC has already largely departed.
01:38But yeah, if you are Jay Powell and you're worried about Fed independence, that would certainly be one way, staying around, to maintain that independence.
01:48Yeah. I was reading John author's piece – I'm sure you've read it this morning also – kind of arguing the case that it really is sort of pointless and self-defeating to try to push the Fed.
02:02And that this issue affects not just the Federal Reserve, the U.S. economy and beyond, that it's a sort of really dangerous move, argues John authors.
02:13And I thought it was very interesting that the two guests that we spoke to this morning, one from Carmignac, talking about how actually this means the U.S. is much more like Turkey.
02:23And then another guest this morning arguing, actually, most of the move was last year.
02:28I wonder, in the process of understanding the threat to Fed independence, where are markets?
02:33Do they think that it's already arrived and they're over it, or do they think it's to come?
02:37Some of it will have been priced in. This is not a new issue. This is an incremental part of an ongoing developing story.
02:42So the market will have priced some risk around this story.
02:45But I don't know what happens next, and nor do the markets, and as a result of which the potential 4A shock is there.
02:51You are going to see, potentially, long-end rates go a little bit higher.
02:54We're going to see CPI out this week.
02:56Can the Fed control inflation, which is a threat to a lot of Americans at the moment, if it's being forced by the Trump administration to lower interest rates?
03:05Its ability to do that disappears.
03:07You've also got to look at this kind of around the idea that the Trump administration clearly wants lower interest rates.
03:15Look at what is happening with credit cards.
03:17Look at what is happening with the cap that the Trump administration is trying to put in place.
03:20Look at what is happening with Barclays stock this morning.
03:22It is down.
03:23J.P. Morgan numbers are out tomorrow.
03:25It is the biggest credit card issuer in the United States.
03:27How is it going to respond?
03:28So you've got this kind of self-defeating story that could come through that Trump tries to help the lower end of the U.S. economy but ends up hitting the stock market at the top end, and that is the top end that drives a lot of the spending at the moment, which is keeping the economy moving.
03:43So there's so many unintended consequences here.
03:46So I don't think the market has fully priced it in because we don't know yet how all the connections are ultimately going to be made.
03:52So we're definitely not there yet.
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