Trump wants a feature cutting
President Trump has been asking that the Federal Reserve begins to reduce interest rates, arguing that his policy is too tight for a deceleration economy. Investors seem to be increasingly in agreement with him. It remains to be seen if they are right. But one thing is clear: the market is not aligned with the Fed.
As recently as March 19, the Federal Reserve projections, the so -called DOT plot, the FED median officiated the federal funds rate to end the year with 3.9 percent. That would imply Only one or two fashion cuts for December.
But merchants are betting otherwise. According to the CME Fedwatch tool, Now there are less than eight percent of Chanance That the fund rate will remain exceeding 3.75 percent by the end of the year. The most likely scenario is three or more cuts, which takes the speed to the basic point range 325-350.
The market does not believe in Powell; And for now, Is on the rise with Trump.
Powell’s optimism paradox, Trump’s concern
The irony in all this is that Trump seems to agree with his critics, including many on Wall Street, who The economy is fragile and needs support. Powell, on the contrary, sounds more and more like the optimist.
In your comments last week, Powell gave an aggressive tone. He said that inflation remains sticky and that the Fed is prepared to keep the rates high for longer. But the market barely flicked and continued with the price of rates cuts.
This creates an unusual situation:
- Trump is echoing the recession warnings of forecasts and market analysts.
- The market is betting on the Fed will soon reach that view.
- Powell remains firm, insisting that politics is “well positioned.”
If Trump and The bond market They are wrong, Powell’s caution can be claimed. But if the pessimists are right, the Fed can soon find Itelf making up again.
If the gloom is correct, justified cut
The recession narrative is everywhere. In early April, JP Morgan Research raised his estimate Probability of a recession this year from 40 percent to 60 percent. The feeling of the consumer causes the bones to have fun abruptly. CNBC’s All-America survey shows that 49 percent of the public thinks that the economy will get worse this year, the result of the sausage since 2023.
If the economy is really woven, as many headlines suggest, then Trump’s call to preventive cuts seems prudent. That is the rational behind the insurance cuts, to Act before a recession takes over.
Of course, the Fed also has a point. The economy is still being maintained. The growth of employment has averaged 173,000 per month in the last two months, virtual and identical to the previous average of six months. The inempleal rate is 4.2 percent, only one tenth of a higher point than the previous six -month damage. Retail sales are solid. Industrial production and housing have been surprising for the rise.
The DOOM is everywhere, but not yet in the data.
And that is disconnection: Trump and markets are quoting for expectations. Powell is reacting to real economic conditions as they currently exist. The risk is that when these conditions turn, it can be too late. AND “Too late” It is a good description of the Powell mandate in the Fed, as Trump pointed out in a social publication recently.
We still don’t know who is right. But it is increasingly clear than Trump’s instincts on rates are more in tune with market prices That Powell’s are. If that reflects a solid judgment or a premature concern, it will defend what they bring in the coming months.
But for now, Fed is atypical. And Trump’s argument is to win more converts per week.