And Then There Is the Fed

First, and most significantly, the Federal Reserve held rates steady again.

Also, in what is a pretty direct, "F%$#-you," Donald Trump, Jerome Powell has announced that he will remain as a Governor for the Fed even after he is no longer Chairman, which prevents Trump from filling that seat.

At his Senate confirmation hearing last week, Kevin Warsh told lawmakers that the Federal Reserve needed a serious shaking up, with “messier meetings” and “a good family fight” at an institution that has cultivated discipline and consensus.

He may be getting all of that and more.

On Wednesday afternoon, the man he’s set to replace as Fed chair, Jerome Powell, announced he wouldn’t be leaving right away. Three of Powell’s colleagues delivered a pointed warning that they are in no mood to cut rates anytime soon.

Every Fed chair for the past 75 years has left the central bank when his or her successor took over. Powell’s announcement that he would remain on the Fed’s board as a governor after handing the baton to Warsh next month broke with that precedent. It underscored how far the Trump administration’s pressure campaign had pushed the Fed into uncharted territory.

Powell’s decision followed a criminal probe of his oversight of building renovations. Trump had cheered that investigation but prosecutors halted it last week to advance Warsh’s confirmation. Last year, Trump attempted to fire a Fed governor in a case that is now before the Supreme Court.

“My concern is really about the series of legal attacks on the Fed, which threaten our ability to conduct monetary policy without considering political factors,” Powell said at his news conference. “I worry that these attacks are battering the institution.”

………

Three regional Fed presidents broke publicly with Powell on the language explaining the decision. The dissent itself was striking: not over the rate action itself but rather because they opposed signaling that a rate cut remains more likely than a rate hike. Powell offered only a light defense at his news conference.

The three presidents—Cleveland’s Beth Hammack, Minneapolis’s Neel Kashkari and Dallas’s Lorie Logan—were effectively serving notice, less to Powell on his way out than to Warsh on his way in: That with energy prices rising, underlying inflation stuck near 3% and tariffs still working through the system, this is a committee unable to deliver the cuts the White House expects.

A fourth official, governor Stephen Miran, dissented in the opposite direction, favoring a cut. Miran, a Trump appointee, is set to leave the board because Powell’s decision to stay denies the administration the vacancy it had been counting on. Four dissents were the most at any meeting since 1992, before the Fed announced its rate decisions in real time.

Well played, soon to be former Fed Chair Powell.