There’s been a popular narrative throughout the year about Fed’s Waller and Fed’s Bowman. Both of them were apppointed by Trump in his first term and given that they started to call for rate cuts before all the other governors, people started to think that they were led by political reasons.
In reality, Waller and Bowman were the only ones right about the labour market. Waller in particular has been making very good cases for rate cuts and his forecasts proved to be right. He expected inflation to reach 3% and then dissipate, and he called for rate cuts because he was expecting more weakness in the labour market. Inflation did rise to 3% (although we still don’t know if it’s going to dissipate) and the labour market did weaken more than expected.
The narrative about the Fed losing independence because of Trump appointments took a big hit yesterday. In fact, the FOMC showed unity since all the voters voted for 25 bps cut and only one voted for 50 bps. The one voting for 50 bps was Miran. Miran was also the only one projecting 6 rate cuts by year-end. Miran was of course driven by political reasons, but since he’s been basically emarginated from the rest, what he does or says in the next months won’t matter at all.
Going back to Waller and Bowman, they voted for 25 bps despite calling for a rate cut already in July. Since then we got two consecutive soft NFP reports and despite that, they decided to vote for just 25 bps alongside their colleagues. This showed unity and independence. People also forget that Powell was also appointed by Trump and despite that, he kept running monetary policy independently.
Trump’s attempt to fire Fed’s Cook is also looking like it’s not going to work. We are now even getting reports that the US Treasury Secretary Bessent made similar mortgage claims cited by Trump to fire Cook. So, even if next year we get a lackey as Fed Chair, the FOMC will still be independent as monetary policy is decided on a majority basis.
This article was written by Giuseppe Dellamotta at investinglive.com.