The News
President Donald Trump’s poll numbers are sliding and the national mood is souring. So when the Fed again ignored his demands to cut interest rates, one might have expected him to lash out.
He didn’t. Kevin Warsh, his pick to run the central bank, is “fantastic… a brilliant guy, smart,” the president said yesterday. Trump threw some drive-by blame on the rest of the Fed board, but couldn’t muster the vitriol he had for Warsh’s predecessor, Jerome Powell.
No economic issue besides tariffs has animated Trump more than interest rates. He wants them lower — a preference forged by his decades in the real-estate business, which thrives on cheap borrowing, and sharpened by the belief that rate cuts mean faster growth and higher stock prices.
But Trump cares less about any specific outcome than about declaring victory. And in getting Warsh in and Powell out, Trump got his guy. He lost on policy but won on personnel, undercutting the Reagan-era governing principle that having ideological allies in key seats will deliver outcomes. Investors are putting 2-to-1 odds on a hike at the Fed’s next meeting in September, and Warsh is comfortable letting investors do the work of cooling the economy for him: “We haven’t done much in 42 days,” he said at yesterday’s presser. “Markets have done quite a bit.”
Trump is unlikely to get the rates he wants, but he got his rate-setter, and seems OK with that for now.
Notable
- Warsh vowed to lawmakers earlier this month that he would “do my job” if challenged by Trump, in what Reuters called his most direct comment so far about handling pressure from the White House.
- Market moves after the Fed’s announcement on Wednesday “were consistent with a central bank inflation credibility shock,” Aditya Bhave, an economist at Bank of America, wrote to investors.