Before the Fed meeting
Today’s decision on the key rate by the Fed will hold no surprises; the rate will remain unchanged, and moreover, no decrease is planned for the July meeting (July 30).
The market estimates that the first possible attempt to reduce the key rate by 0.25 percentage points will occur no earlier than September 17, with another attempt at 0.25 percentage points on December 10, i.e., two reductions this year totaling 0.5 percentage points.
However, the market is expecting a lot. For example, in September 2024, it was assumed that the rate for the current June meeting would be 3.25%, with a 35% probability that the rate would be 3% or even lower, but it turned out to be 4.5% with no clear prospects for a decrease.
The market is almost always wrong when it comes to predicting the Fed's rate, so one should not rely too heavily on market forecasts, even if they are made by professionals.
The market assesses economic feasibility but completely overlooks the political context.
Apart from Powell's personal (exclusively personal) vendetta against Trump (Powell's disdain for Trump is so great that he practically never refers to Trump by name or surname, only as an anonymous subject), there are more rational motives.
Trump, through his actions, or rather his behavior (the dismissive few promises from Trump reach practical implementation, i.e., everything goes into 'the horn', usual shaking of the air) undermines trust in the dollar financial system, creating chaos, breaking informal ties with partners, and increasing overall uncertainty.
Money loves silence, predictability, and clear rules of the game, especially in conditions of heightened macroeconomic, financial, and geopolitical imbalances.
If Trump were acting as a stand-up comedian or an MC at provincial weddings – such behavior would be acceptable, but for a leader of the world's financial center? A good attempt to stir up this hornet's nest.
Powell, being at the epicenter of the Deep State, representing globalists and global capital, will obviously contribute to the 'taming' procedure of the unruly buffalo-madman, a disruptor of stability and the 'status quo.'
"To 'tame' can be done through discrediting Trump's policies and company. There are so many foolishness and mistakes from Trump that no one will discredit Trump more than Trump himself. Just wait for the boss to make a fool of himself, and he will do so on his own without external help.
Therefore, the Fed's monetary policy cannot be viewed solely through the lens of financial and economic processes.
The clash between Trump and Powell reaches an existential level, as it concerns who will control the Fed – whether the deep state will seize the initiative and restart the global project, or Trump will dismantle the architecture of the financial elite, subjugating the Fed, creating a manual central bank in the manner of African or Latin American dictators with all the resulting consequences (unlikely and practically excluded).
A crisis is needed to reboot the system, and the one deemed responsible will be appointed as such under whose 'wise leadership' the failure occurred. Powell will blame Trump, while Trump will accuse Powell, but Powell has many more arguments.
At the meeting, one should pay attention to the accents and details. Powell will again say that 'time is needed to assess the entirety of the data to make the right decision, and economic conditions currently allow for waiting and meticulously evaluating incoming information, as geopolitical and tariff risks prevail over disinflationary factors,' hinting at Trump's policies.
The current macroeconomic disposition already has the substance for a rate reduction, but such a tone would mean that Powell will not rush.
This is to say that there are no guarantees that under Powell the rate will be reduced at all, and that would be in May 2026.
Powell will be forced to move towards easing monetary policy when the lack of response from the Fed threatens to destabilize credit and debt markets, i.e., when it becomes impossible to 'sit on the fence waiting for data.'
In other words, the actions of the Fed will be reactive rather than preventive, preventing potential threats.