Over the past two days, the Democrat party/DC establishment has countered Trump's pressure on Jerome Powell, by deploying two highly political figures for media interviews.
Yesterday, it was Lael Brainard, Biden's head of the National Economic Council. Today CNBC did a 21-minute interview with Janet Yellen, the former administration's Treasury Secretary.
Of course, these are two former Fed officials, but they're clearly political adversaries, bemoaning the politicization of the Fed, by … politicizing the Fed themselves.
They were there to shape opinion — to discredit Trump's calls for rate cuts and regime change at the Fed, as reckless and destabilizing.
On the latter, regime change and reforms at the Fed would threaten the establishment's grip (maybe long-term) on macroeconomic policy.
So, they're fighting back, which gives credence to the idea that a "shadow Fed" has indeed taken shape (i.e. Trump-aligned candidates now openly signaling future monetary policy to markets).
With potential for substantially easier Fed policy on the horizon, 10-year yields have adjusted sharply on the week (down). And the S&P 500 closed at a new record high today.
So, the markets are reacting favorably to the outlook for policy alignment, where monetary policy will be (at some point, maybe soon) in synch with fiscal and industrial policy.
All of this sets the stage for a critical 10-days: we’re just over a week away from the next Fed meeting, and from the expiration of Trump’s 90-day pause on reciprocal tariff escalations.
Tonight, a trade deal was announced with Japan. Earlier today, Scott Bessent signaled that China will likely be given another extension.
That leaves Europe as the potential flashpoint.
Remember, just before the 90-day pause, the European Commission announced it was preparing retaliatory tariffs against the U.S. Now, it’s targeting €72 billion worth of American goods—making the prospects for a deal with Europe look dim.
