A storm is brewing, and everyone saw it coming. The Federal Reserve, our nation's central bank, is under attack, and the repercussions are far-reaching.
With the recent rate cuts, the Fed finds itself at the center of a heated debate. While the CME Fed Watch tool predicts a low probability of further cuts in January, major financial institutions like Goldman Sachs and Morgan Stanley anticipate a shift in June and September. But here's where it gets controversial: this prediction was made before the current assault on the Fed, and it's sure to be revised, given the ongoing turmoil.
The assault, fueled by Trump's war threats, has led to a dramatic shift in market sentiment. Bloomberg refers to it as the "sell America" trade, and its impact is felt across the board - from the dollar's decline to the fall in gold and silver prices, and even equity index futures. It's a direct response to the Trump administration's call for lower rates, which contradicts the Fed's mandate to manage inflation and keep it stable at around 2%.
And this is the part most people miss: the assault isn't just about rates. It's about power, control, and the very integrity of our financial system. The Supreme Court's decision in the case against Fed Gov Cook could be a game-changer. Cook, like Letitia James, is charged with lying on a mortgage application, naming multiple primary residences. It's a complex case, requiring proof of intent and seemingly late disclosures. Both cases appear to stem from Pulte, the director of the Federal Housing Finance Agency, who has his own conflicts of interest. Classic Trump cronyism, some might say.
Tomorrow, we get the December CPI report. Bloomberg forecasts a median increase of +0.3% in both headline and core inflation, year-over-year, at 2.7%. This data point, though not the Fed's preferred measure, will be hard to ignore. It's a stark reminder of the challenges the Fed faces in balancing economic growth and price stability.
The forecast for the Fed's future is uncertain. While Powell, a Boy Scout at heart and a careful strategist, is likely to refute the charges against him, we're left with the mess of a lengthy court process and a deluge of misinformation. It's a challenging situation, and one that's unlikely to resolve quickly.
The dollar's recovery seems bleak, and the next few days will be critical in assessing the longevity of this problem. This excerpt from "The Rockefeller Morning Briefing" offers a glimpse into the experienced analysis and insights provided daily for over 25 years. It's a deep dive into the complexities of our financial system, and it's not for the faint-hearted.
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