Powell’s departure seems inevitable, and the primary question remaining is when this will occur. Kugler’s resignation highlighted the possibility of Powell stepping down before May. Growing opposition within the Fed suggests that the upcoming meetings might not mirror past ones, indicating a shift in dynamics. Naturally, some individuals are already eyeing Powell’s seat.
New Fed Chair Prospects
Christopher Waller has clearly emerged as a potential candidate for the Fed Chair concerning interest rate cuts. Discussions about Waller preparing for the presidency surfaced before last week’s meeting. Bowman aligns with Waller, opposing Powell’s stance strongly enough to warrant dissension in interest rate decisions.
Waller recently had meetings with Trump’s team, who views him as a viable alternative for the Fed Chair position. According to sources familiar with the matter, Trump’s advisors are particularly keen on Waller. His strategy, focusing on forecasts rather than current data, appeals to them alongside his position within the Fed.
There have been covert discussions, leaving details scarce. The most significant known fact is that Waller has not yet met with Trump.
Fed Announcements and Cryptocurrency Impacts
At 19:00, Trump is set to sign a new executive order regarding cryptocurrencies, causing a surge in their prices. In recent Fed announcements, two out of three members advocated for rate cuts. Factoring in Kugler’s replacement, this brings the total members in favor of rate cuts to five. According to FedWatch, a rate cut in September seems inevitable, with further cuts anticipated for the remainder of the year.
As this piece was being prepared, Fed member Bostic provided his insights:
“Numerous economic scenarios might unfold, making probability assessments challenging. The economy is expected to continue slowing, yet the implications for employment and inflation remain uncertain.
Firms are taking a ‘wait and see’ approach regarding employment. Price pressures are likely over the next 6 to 12 months, putting additional pressure on the Fed.
The key question for the Fed is whether tariffs will change prices temporarily or more permanently.
Policymakers won’t react to a one-time price change, yet there are compelling reasons for skepticism.
I doubt the tariffs’ effects will be temporary. The manner of tariff implementation complicates impact determination, suggesting a longer-than-expected duration.
Businesses are employing various approaches to address price adjustments, sparking debates about changing expectations. I expect businesses will continue adapting to tariffs over the coming year.
Small businesses face significant tariff impacts due to supply chain constraints.
Price changes are still unfolding. Pressure on low-income consumers is growing, with pandemic savings exhausted.
Consumer reactions to further price hikes are uncertain. Markets’ ease in overcoming tariffs’ price impact is surprising. I anticipate continued high volatility.”
The most critical part of his statement reads:
“A rate cut remains appropriate this year, although many data releases will occur before the September meeting. Employment data has indicated that risks to the labor market are much higher than those seen before the last meeting.”
