r/investing • u/Mindless_Designer519 • 2d ago

What do you think about Powell's decision?

Hey everyone,
I wanted to hear your thoughts on Powell's recent decision not to cut interest rates.

  • Do you think it's the right move considering the current economic conditions?
  • How do you see this impacting the markets in the short and medium term?
  • Are you expecting a rate cut later this year, or is the Fed likely to hold for longer?

Curious to hear your takes—especially from those following macro trends or managing portfolios based on rate expectations.

124 Upvotes

81% Upvoted

225 comments sorted by

View all comments

994

u/amg-rx7 2d ago

Data dependent. The Fed is the only rational actor atm.

187

u/LostMyTurban 2d ago

Until Trump removes Powell cause "why have any sanity"

245

u/manyouzhe 2d ago

He cannot remove Powell, but Powell’s terms ends next year and he will definitely replace with a yes man. Brace for higher and longer inflation.

69

u/BumbleSlob 2d ago

incoming Sarah Palin. You might laugh now but you also know it is possible.

39

u/wha2les 2d ago

Oh. I was assuming we would merge with the Russian Central bank because 1 country with 2 central bank is weird... /s

2

u/Aureliamnissan 2d ago

Oh we’re definitely getting vlocker 2.0 and Carter interest rates again if that happens.

1

u/[deleted] 2d ago

[removed] — view removed comment

0

u/AutoModerator 2d ago

Your submission was automatically removed because it contains a keyword not suitable for /r/investing. Common words prevalent on meme subreddits, hate language, or derogatory political nicknames are not appropriate here. I am a bot and sometimes not the smartest so if you feel your comment was removed in error please message the moderators.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

1

u/thisoneismineallmine 2d ago

I was hoping for Ted Nugent or Chachi.

1

u/Many-Coach6987 2d ago

Dude, why scare us?

1

u/Dan_the_Garbage 2d ago

You skipped right over Kid Rock and went to Palin....interesting.

16

u/chatterwrack 2d ago

The World Bank is obsessed with central banks being independent. It’s like one of their core rules for keeping economies stable.

If a Fed chair wasn’t independent and just did whatever the president wanted, the World Bank would not be happy. Politicians always want to juice the economy before elections (by keeping interest rates low), even if it wrecks everything later. An independent Fed is supposed to ignore that noise and focus on keeping inflation low and the economy steady.

There’s a real risk Trump would install some total sycophant as Fed chair — someone who would just do whatever he says. That would be horrible for the economy. It would tank trust in the dollar, probably spike inflation, and basically make the U.S. look like a banana republic. The World Bank (and the rest of the world) would lose their minds.

18

u/manyouzhe 2d ago

This administration is not known for its respect for“independence” even it is written in law.

One can argue that the federal reserve is too important and he can’t simply ignore its independence like he did with some other agencies. But he doesn’t need to have a full control, not even need to issue EOs. Just someone who listens carefully.

7

u/cafedude 2d ago

and basically make the U.S. look like a banana republic.

Too late.

5

u/Aureliamnissan 2d ago

Yeah, this crash is tariff related, but it’s hard and fast because the trust in the admin and the dollar isn’t there to slow it down.

4

u/godofpumpkins 2d ago

He’s not allowed to by law, but they’ve shown repeatedly that they don’t consider that to be a reason not to do something

5

u/manyouzhe 2d ago

Well, I don’t have a counterpoint on that. Like I saw somewhere else, Trump can stay irrational longer than you or I can stay solvent, so there’s that.

8

u/FranklinUriahFrisbee 2d ago

My guess is congress will be much slower in rubber stamping one of Trump's sycophants in a year.

1

u/manyouzhe 1d ago

Senate maybe. We’ll see

2

u/Dan_the_Garbage 2d ago

Hasn't Trump illegally removed two individuals from the Fed? One of them being Kathy Harris who told Bloomberg Trump could illegally remove Powell if he wanted.

1

u/manyouzhe 1d ago

Yes, we all know he can do that… Problem is he is irrational so it’s hard to predict if and when he’ll do it…

1

u/Dan_the_Garbage 1d ago

Right, while my buds were raking in premium from their puts on SPY, I was the only one nervous about ANY play involving Trump. He pivots on a dime and each decision is worse than the last.

88

u/Notwerk 2d ago

He threatened to last time Jerome didn't cut interest rates to his liking and Jerome blinked and obliged. That's partly how we ended up with runaway inflation.

I'm guessing Powell probably learned a lesson from that. I'm willing to bet Trump did not.

9

u/Kanolie 2d ago

I see this literally all the time on reddit, and it's just consistent proof that almost nobody commenting here pays any attention at all to the actual economy. Y'all are all just commenting based on politics and vibes.

Off the top of my head I'll run a quick timeline: in fall of 2018 you have a significant dollar shortage appearing in the eurodollar market, showing signs of liquidity constraints across these various financial corridors. The Fed elects to hike anyway in December. Late winter/spring roll around and it's almost immediately clear this was too hawkish, how do we know? Housing starts (both single and multi) fall, business investment falls, ISM PMI falls below 50. By summer you've got a full two quarters of negative manufacturing growth, industrial output is down from December, CPI starts falling back below target. Bounce out another few months and the knock on effects from policy tightness are so great that the Fed needs to step in and backstop liquidity in the repo market. This is the first time they had to do that since the early 00s.

But yeah, totally, Trump was the reason policy rates got cut, not all of the shit actually happening in the economy...

Obviously Trump screaming incoherently from the white house wasn't a good thing, but y'all gotta pay attention to the actual economy too lol.

E: because apparently you've got to beat people over the head with this:

Dollar shortage: https://www.wsj.com/articles/the-dollar-shortage-is-back-1542625917

Housing starts falling: https://www.cnbc.com/2019/07/17/us-housing-starts-june-2019.html

Industrial Output falling: https://www.marketwatch.com/story/industrial-output-falls-by-most-in-17-months-in-october-2019-11-15

Manufacturing recession: https://www.cbsnews.com/news/u-s-manufacturing-is-in-a-recession-what-about-the-rest-of-the-country/

Output hits a 10 year low: https://www.reuters.com/article/economy/us-manufacturing-dives-to-10-year-low-as-trade-tensions-weigh-idUSKBN1WG4IT/

ISM PMI falling: https://www.cnbc.com/2019/10/01/us-manufacturing-economy-contracts-to-worst-level-in-a-decade.html

Illiquidity in the repo market was so bad it got it's own wikipedia page: https://en.wikipedia.org/wiki/September_2019_events_in_the_U.S._repo_market

Inflation measures falling below target: https://www.bls.gov/opub/mlr/2020/article/producer-price-inflation-slows-in-2019.htm

You can backcheck all of these - each and every one started their decline either Q4-18 or Q1-19. How someone can look at the totality of information and conclude that cutting rates wasn't driven by economic circumstance is beyond me. Just admit ya weren't paying attention lol.

https://old.reddit.com/r/Economics/comments/1icemfi/the_fed_meets_for_the_first_time_since_trumps/m9qavb1/

9

u/samuelj264 2d ago

I mean the market was tanking that time, wasn’t just trump in his ear

15

u/Notwerk 2d ago

It wasn't tanking. It was booming. Trump started that shit in 2019, before the pandemic:

https://www.cnbc.com/2019/09/18/trump-says-powell-and-the-fed-fail-again-have-no-guts-no-sense-no-vision.html

That was on the tail of the Obama recovery. The unemployment rate had been sitting under 4 percent (3.6). We should have been RAISING interest rates, not cutting them. And trump wanted them cut to zero...with 3.6 percent unemployment and a stable economy.

That's where the runaway inflation started. By the time the pandemic was news a year later, we were out of tools and had to resort to mailing out monopoly money as direct infusions.

-4

u/Single-Macaron 2d ago

Market was tanking over COVID uncertainty, rates shouldn't have been cut

5

u/samuelj264 2d ago

I was assuming prior comment was about Q4 2018

And yes they should have. Wtf are you talking about. The global economy shut down

2

u/Notwerk 2d ago

Correct. People have short (or shit?) memories.

0

u/Single-Macaron 2d ago

Not at all a short memory, read my other comment. Cutting interest rates was a dumb response when we were already doing PPP

0

u/Single-Macaron 2d ago

Why do you need to cut interest rates when already doing loads on PPP loans to save businesses?

We didn't need to cut interest rates, they were already low. Lower interest rates didn't save companies from going out of business. Most companies who took PPP didn't even need it. Tech didn't suffer one bit, sporting equipment and home improvement companies went off

COVID didn't crush all industries. Mostly just retail, restaurants, etc. they were all saved by PPP

0

u/Potato_Octopi 2d ago

What makes you think PPP was a cure all?

1

u/Single-Macaron 1d ago

How did lower interest rates save businesses during COVID? What bank is giving loans to a company that lost their revenue stream overnight?

1

u/Potato_Octopi 1d ago

Different businesses and different industries had different COVID experiences. Not every business was a restaurant on lockdown with zero revenue.

Housing saw a big jump in demand from low mortgage rates, and households got a large income windfall from lower monthly payments.

Equipment manufacturers also saw increased demand. Lower rates make it more attractive to buy or upgrade large expensive items.

1

u/Single-Macaron 1d ago

Yeah... Kind of my point.

  • Construction and home remodeling did very well
  • RV, camper, ATV, and auto sales did very well
  • Tech did quite well. Many companies pivoted from retail operations to needing a better website. Web development services and companies like Shopify did great

Local restaurants and retail struggled for a little bit.

Everyone got PPP, the struggling companies and the ones who were better off.

Why did we need lower interest rates? It was a dumb move. Contributed to inflation and wasn't needed by anyone who struggled.

Mortgage rates went down as demand went up, why did that make sense?

Personally I'm happy to have locked in at 2.87% though. Will never see that again so thank, Trump.

→ More replies (0)

13

u/Franks2000inchTV 2d ago

Fully trust powell to barricade himself in the Eccles Building before he accepts an illegal order to leave office.

14

u/mav194 2d ago

President doesn't have power to remove Fed Reserve chairman

29

u/OrneryZombie1983 2d ago

I have not read the full Project 2025 but the traditional conservative "thinking" is that the Fed is unconstitutional because it does not get its funding from Congress. In their view with no annual budget review there is no mechanism for Congressional influence. Now that Congress is now ceding almost all of their authority to the executive I guess they think the President can either remove the chair or tell him what to do.

13

u/Abalith 2d ago

Here's the link to the relevant page if you or anyone is interested. They want to ultimately abolish it.

https://static.project2025.org/2025_MandateForLeadership_FULL.pdf#page=769

8

u/OrneryZombie1983 2d ago

Well, that's some nightmare fuel. Regional banks and market forces will keep everyone honest.

27

u/WorkAccount1993 2d ago

Wouldn’t be the first illegal thing he’s done.

4

u/wha2les 2d ago

presidents don't have power to do plenty of things... and Republicans and trump have done many of those things anyways...

Who is gonna stop them? the spineless democracts? lol...

The jello like Republicans? lol

1

u/samuelj264 2d ago

YET who knows with this president and congress

1

u/cafedude 2d ago

No, but Powell's term ends next year. You can bet Trump will install a toadie.