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Last week, the Fed kept rates unchanged. Powell delivered what critics called a blathering, hole-filled testimony, asserting that employment data must be viewed ‘holistically’—a concept that remains vague for many observers. While repeating that “uncertainty about the economic outlook remains elevated,” Powell’s obfuscation failed to convince all FOMC members. Dissenting voices—Waller and Bowman—marked the first dual dissent since 1993.
Markets took note: Powell’s hawkish tone drove the implied probability of a September rate cut down—from 70% to 46%. Yet the picture changed abruptly with Friday’s jobs report: nonfarm payrolls for July came in at 73k (vs 104k expected), and shock downward revisions to May and June. May was revised down by 125k from 144k to 19k and June was revised down from 147k to 14k! This set off a dramatic swing in rate cut bets back to nearly 80% probability. As Waller warned, “once we account for expected data revisions, private-sector payroll growth is near stall speed.” Bowman echoed, “With economic growth slowing this year and signs of a less dynamic labor market, I saw it as appropriate to begin gradually moving our moderately restrictive policy stance toward a neutral setting. In my view, this action would have proactively hedged against a further weakening in the economy and the risk of damage to the labor market.” It is hard to imagine how the other Fed members could have had no feeling on these revisions, while Waller and Bowman were very clear about weakening labor markets
Powell’s repetitive claims that, somehow, we are going to have inflation due the tariffs, are not holding water. After Friday’s revisions Trump clearly looked vindicated in his calls for the FED to cut rates. Powell’s strategy in holding out until something breaks, so he can harm Trump and the GOP in the midterms, is now being questioned my most of the financial community. Trump didn’t waste any time.
Trump posted on social media demanding that “THE BOARD SHOULD STEP IN AND DO WHAT EVERYONE KNOWS NEEDS TO BE DONE!” To add to confusion and Fed discord, Adriana Kugler (Biden appointee and DEI zealot) resigned on Friday- back to the ivory towers of academic onanism at Georgetown. Does this mean there are more resignations to come?
Trump now has an opportunity to replace Kugler and potentially position his pick as the next Fed Chair. If Trump appoints a replacement to Kugler, the composition of the BoG will move from 2 Conservatives:5 Partisans (Including partisan Powell of course) to 3:4, much more balanced. This could indeed force Powell’s hand and make it considerably more difficult to ‘hold out’ against Trump and economic growth, before the end of Powell’s term.
One critical thing to note here is that the Fed Chairman must be appointed to the Board of Governors and be a sitting member, before he or she can be nominated by the President for Fed Chair. Powell was selected by Obama to be on the Board of Governors in 2012. Et voilà, Powell was yet another intentional ‘holdover’ the Uni-party chose and who, Trump ostensibly believed, would be adequate for the job. Another hit job done to undermine Trump’s first term. The MSM carries the narrative that if Powell has been a bad Fed chair, the blame lies squarely on Trump as he was the one who nominated Powell. Not that simple.
Trump was inaugurated in Jan 2017. There were 5 members of the Board:
Janet L. Yellen (Chair)
Stanley Fischer (Vice Chair)
Lael Brainard
Jerome Powell
Daniel Tarullo
Two seats were already vacant when Trump took office. Tarullo resigned in February 2017, which created a third vacancy. There were delays to filling these seats due to both administrative and Senate confirmation processes. It wasn’t until October 2017 That Randal Quarles was confirmed. It took until August and November 2018 to fill the other two seats (Clarida/Bowman). Powell was nominated by Trump in November of 2017.
When Powell took office as Chair of the Federal Reserve, the target rate was 1.25%-1.5%. By December 2018, Fed Funds were 100 bps higher. CPI Dec ’17-Dec ’18 rose by 1.9%. During the Obama years (yoy by month highs) :
2011 Sept 3.9%
2012 Mar 2.9%
2014 May/June 2.1%
2016 Dec 2.1%
Critics suggest that there was an agenda here by Powell to slow down the economy and to harm Trump.
Let’s go back to pre-election 2024. CPI in Sept before the Fed meeting was 2.4% and Powell cut rates 50 bps, unprecedented. Traditionally, the Fed never cut rates in the fall before an election year unless there was a ‘crisis’. Examples: 2008 (GFC), 1992 (S&L + recession). Yet, in 2024 before the election, he chose to cut 50bps. Remember: at the time inflation was above his target. The Fed then cut again in December with Core at 3.2%. The latest CPI print was June 2025 at 2.7%- enough said.
Despite the huge revisions to the jobs numbers this week and no rate cut, there might be a silver lining to the Trump vs Powell fight. Given that Kugler resigned, Trump will have the opportunity to reshape the Fed with a new appointee and potentially line up a new Chair for whatever comes first, a Powell resignation or his term ending (May 2026). A new appointee or “shadow” Chair would certainly be a thorn in Powell’s side. It has become more and more obvious that Powell has an agenda and is finding reasons not to cut. All the economic data is showing that we are clearly on a disinflationary path, irrespective of Powell’s tariff voodoo.
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