?The Fed Under Trump

“I know more about interest rates than the Fed.”— President Trump, January 7, 2025

Will Powell address the President’s statements on rates, inflation during today’s Q&A?

Fed Day no rate cut/no dots to report —> all attention on Jerome Powell’s Q&A. President Trump insists rates are too high, what say Jay?

“We are inheriting a difficult situation from the outgoing administration, and they’re trying everything they can to make it more difficult. Inflation is continuing to rage, and interest rates are far too high.” – by President Trump, January 7, 2025. 

DJT has been critical of Fed Chair for years; October of 2019, DJT said: “The Federal Reserve is derelict in its duties if it doesn’t lower the Rate and even, ideally, stimulate. Take a look around the World at our competitors. Germany and others are actually GETTING PAID to borrow money. Fed was way too fast to raise, and way too slow to cut!”

There is actually a lot President Trump can do to lower rates. If deficit were cut in half, 10-year UST would be 50-100bps lower, I believe as annual T-supply would decline $1 – $2 Trillion! The President knows this; DOGE is all about cutting wasteful spending, responsible government, thus 1) allowing the private sector to do its part/creating a greater relative multiplier effect, and 2) bringing interest rates down with less debt sold to the market.

For now the Fed is on hold. It does not want mass media or markets to think they are buckling under political pressure, insists that tariffs are inflationary (which they are not), wants confirmation that inflation is decelerating after the Q4 bump-up.

With equites valuations relatively full, credit investors rejoice knowing 7.5% is achievable in public markets, while Private Credit strategies should have another solid year of 12% for top-quartile managers.