And Janet Yellen was too short to stand up to Trump?
Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy‑‑that is, neither speeding up nor slowing down growth. My FOMC colleagues and I, as well as many private-sector economists, are forecasting continued solid growth, low unemployment, and inflation near 2 percent.
In any other circumstance, this would have been a cogent reasoning of a macro policy by a Fed chairman. But in this case, even Jay Powell must admit that any kind of dovish sentiment will be seen as a capitulation to the petulant adolescent sitting in the Oval Office whining to anyone who will listen that the guy running the Fed is a disloyal hawkish underminer.
Jay Powell was in an impossible position here. Markets are showing that they've become allergic to money that isn't free, there's a lot of uncertainty out there about trade, and he's been raising rates without much anesthesia over the last few months. So, yeah, there was ample reasoning (and data) to hold off on another raise before the end of 2018.
But on the other hand, Trump has created a reality in which anything other than a .25 bump is tantamount to Jay kneeling before Emperor Donald and apologizing for running the Federal Reserve as an independent organ of the United States Government.
One could also argue that Trump needed this kind of boost going into the G20 Summit in Argentina, but that would be a pretty stupid argument considering that we're talking about Donald Trump, a man who has apparently decided that General Motors is a state-owned private business, does not believe in data when he can believe his magical gut and spent more than a few minutes this week proving to the WSJ that he knows jackshit about how global trade works. By making the informed decision, Powell is passively kowtowing to Trump, Larry Kudlow and the sobbing pleas of a confused and desperate Steve Mnuchin.
But what's most troubling here is that Jay Powell seems to know he's a cuck now:
We also know that the economic effects of our gradual rate increases are uncertain, and may take a year or more to be fully realized. While FOMC participants' projections are based on our best assessments of the outlook, there is no preset policy path. We will be paying very close attention to what incoming economic and financial data are telling us. As always, our decisions on monetary policy will be designed to keep the economy on track in light of the changing outlook for jobs and inflation.
Jay Powell's impossible job is proving to be impossible.
The Federal Reserve's Framework for Monitoring Financial Stability [Federal Reserve]