Furious Fed Chair Drops Truth Bomb Trump Feared Most

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0:37Michael Popok:Federal Reserve Jay Powell in public comments today, his first speech since the Federal Reserve had a lower rates to try to bail out Donald Trump. In those public statements, he threw up the caution sign saying, in effect, that there are mixed messages in the economy. We have inflation inching up. We have jobs dropping off the shelf. And as a result, the Federal Reserve is going to have to be cautious with any future rate cuts. And the markets responded. This is how Federal Reserve chairpeople have to communicate with the White House. They show up in places like Rhode Island at the Chamber of Commerce and they give a speech.

1:19Michael Popok:This one was introduced by Senator Jack Reed of Rhode Island. And listen, Jay Powell knows how Jack Reed is going to introduce him. So I'm going to show you some clips today that was a harsh criticism in Jay Powell's own way of the Trump administration and the markets reacting. It kicks off first with Jack Reed, Senator Jack Reed, introducing him. And listen to these introductory remarks and harsh criticisms of Donald Trump and his economy, which by extension, Jay Powell implicitly adopts because he's following those introductory remarks with his own speech and interview. Let's play Senator Jack Reed first.

2:02Chair Powell deserves credit for navigating those choppy waters. Nevertheless, average Americans are still facing significant economic challenges due to the chaotic policy agenda of the current administration. Tariffs, health care cuts, a massive debt increase, and interventions in the operations of major corporations and universities have all proved disruptive and costly. Real wages for most American workers remain stagnant. We still have not fully tamed inflation. Roughly 36 million Americans are experiencing poverty, and housing is too expensive and in too short a supply everywhere, but particularly here.

2:52The policy chaos is extended into a direct assault on the Fed's independence and personal attacks by the President against members of the Fed. But Chair Powell has met these challenges with equanimity and professionalism. He understands that a strong and independent central bank can contribute to sound economic policy in this nation. He understands the impact that monetary policy has on communities and families and businesses. He has somehow managed to stay laser focused on achieving the Fed's dual mandate. to achieve maximum employment and stable prices.

3:35Michael Popok:Okay. Now, from there, what impacted the markets the most today is that they were hoping for a series of interest rate cuts by the Federal Reserve. I mean, the blunt instrument of the Federal Reserve to try to positively impact the economy. They only have really one. It's interest rate adjustment. They lower the overnight interbank rate between banks to somewhere between four and a quarter and 4%. And then it has a cascading impact on all interest rates that are charged to consumers and businesses for loans, for credit cards, for mortgages, for student debt, for home loans, you name it, all starts with the Fed's rate.

4:16Michael Popok:Now, we just had on Wednesday, the monthly or quarterly meeting of the Federal Reserve Open Markets Committee. There's 12 members of it, but it's led by Jay Powell of the Federal Reserve. And they voted to lower the rate a quarter of a point, except for Stephen Mirren, who just got put on there by Trump and still works in the White House, who had access to all the White House data, all the White House economic data. He pushed for a half a point cut. But today, during this Rhode Island meeting, Jay Powell pumped the brakes on any more rate cuts. Here's a clip of him talking about that there is no risk-free environment.

4:56Michael Popok:Let's play the clip. Turning to monetary policy. Near-term risks to inflation are tilted to the upside, and risks to employment are tilted to the downside, a challenging situation. Two-sided risks mean that there is no risk-free path. If we ease too aggressively, we could leave the inflation job unfinished and need to reverse course later to fully restore 2 % inflation. If we maintain restrictive policy too long, the labor market could soften unnecessarily. When our goals are in tension like this, our framework has long called for us to balance both sides of our dual mandate. The increased downside risks to employment have shifted the balance of risks to achieving our goals.

5:42We therefore judged it appropriate at our last meeting to take another step toward a more neutral policy stance, lowering the target range for the federal funds rate by 25 basis points to 4 to 4.25%. This policy stance, which I personally see as still modestly restrictive, leaves us well positioned to respond to potential economic developments.

6:04Michael Popok:Now, what is he talking about? Got the twin mandates that have been given to the Federal Reserve by Congress. Really, just two. Isn't it nice to have a job you only have to do two things? Two things. It's reasonably not complicated either. You need to keep inflation low. At the same time, you need to keep job creation high. But those two things are often in tension. The more full employment we have and higher wages we have, the more higher inflation we have. So it's always a delicate balance of oil and gas, if you will, for the engine of the American economy. Here's how Jay Powell, during his Rhode Island interview today, how he put the downward pressures on Trump's economy.

6:47Recent data show that the pace of economic growth has moderated. The unemployment rate is low but has edged up. Job gains have slowed and the downside risks to employment have risen. At the same time, inflation has risen recently and remains somewhat elevated. In recent months, it has become clear that the balance of risks has shifted, prompting us to move our policy stance closer to neutral at our FOMC meeting last week. GDP rose at a pace of about 1.5 percent in the first half of this year, down from 2.5 percent last year. The moderation in growth largely reflects a slowdown in consumer spending.

7:27Activity in the housing sector remains weak. Goods prices after falling last year are driving to pick up inflation. Incoming data and surveys suggest that those price increases largely reflect higher tariffs rather than broader price pressures. Disinflation for services continues, including for housing services.

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9:09Michael Popok:And that one was relatively straightforward. Tariffs impact jobs because in this environment, in this economy, as we're waiting to see that large tariff numbers get passed through to consumers, because that's all tariffs are. Tariffs are the biggest tax increase on the American consumer and the American voter in history. You know, when you put a 15 or 50 percent tax on another nation and its goods, what do you think eats that? In the beginning, there's some burden sharing. Maybe some of the importers will eat some of the costs, some of the exporters, some of the retailers, some of the supply chain until it gets the consumer.

9:47Michael Popok:So the prices won't go up much. But those days will be over. J.P. Morgan Chase, their analyst, believes that 70 percent or more of the tariffs are going to get passed and paid by the American consumer. And that concerns J.Pell. Here's a clip. A lot of what we're doing with our time is trying to understand the current position of the economy. I mean, what's actually going on in the economy today? Pardon me. So part of that is hiring rate has really dropped. Job creation has dropped very sharply. So what are the factors there? So I mentioned earlier, I think, part of it just is there's a lot of uncertainty about the direction of public policy.

10:27And so companies are holding off. They're not hiring. And when you don't hire through attrition, your labor force shrinks and you save money that way.

10:38Michael Popok:And then you had sort of his final nail in the coffin of the Trump economy. And you could see how, you know, very genteel and very, you know, his personality is one that provides a fair amount of gravitas and stability. He's low key. He's not reactionary. He's not a bomb thrower. That's what we need as our central banker. There's a reason the Jay Powells of the world, the Mark Carney's of Canada, who's now the prime minister, but had been the central banker, they all sort of fit the same, you know, they're cut from the same cloth. But then he was asked particularly about why jobs aren't being made, why, what's happening with immigration.

11:30Michael Popok:And how is that impacting the job market? Remember, twin goals of the Fed, keep inflation down to 2%. So far, it's moving up to 4 % and keep people employed. Let's hear his clip about that, which I consider to be the final nail in the coffin. Well, if you could elaborate, what are some of the factors that are leading to depressed demand for labor? So depressed demand for labor, you know, based on surveys and talking to people who are doing hiring, a big chunk of it is that they're just unsure about what to do. Businesses, and I'd like to love to talk to people after this, you know, businesses don't, they don't want to do a lot of hiring.

12:16They may be postponing major capex, major initiatives, major acquisitions. And, you know, they'll maybe they'll replace workers who retire, but they're not looking to grow. This isn't every company and every part of any every company in the world. It's just an effect kind of at the margin. That's that's got to be part of it. I think that's that's the demand side. The supply side, of course, has a lot to do with immigration policy. So immigration was at a very high level for two or three years before this year. And now immigration has really gone close to zero and immigration is not really contributing to the labor force, to labor force growth now, whereas it's been most of what the labor force growth was.

12:59And now, so at the same time, you've got declining demand and also declining supply of workers, of new workers.

13:09Michael Popok:Now, this is how the Federal Reserve communicates. Jay Powell gives a speech. He may give a speech in Jackson Hole, Wyoming a month or so ago with all of the central bankers from around the world. He might go to the Rhode Island Chamber of Commerce and give a speech that everyone on Wall Street and in financial services sits at rapt attention to get the results. He might, or others, let's be frank, there's 12 regional bank presidents for the Federal Reserve, there's seven Board of Governors, and on the Federal Open Markets Committee, there's 12 of them on there, seven of the Board of Governors, five that come off the rotating group of central bankers for the different Federal Reserve regional banks.

13:57Michael Popok:So they each take a turn creating a gang or committee of 12. And they go out and give speeches. They're not gagged. And everybody's sitting there with their, especially when it's Jay Powell, you know, What did he just say? Look, I'm doing a hot take about it. And so that's the rationale. That's how they speak. Now, the thing that was the scariest, which he's too polite to mention, is that Stephen Mirren, who just got appointed by Donald Trump to be the replacement for a person named Kugler, who Biden had appointed, who stepped down. Stephen Mirren didn't really have access to the Federal Reserve, the Fed's economic data.

14:41Michael Popok:He had access only to where he last worked, where he currently works, which is for the White House as the chairman of the Council of Economic Advisors. His data was so scary to him that whereas 11 people raised their hand out of 12 and said, let's do a quarter rate cut and get it down to about 4%, again, you're going to pay, we're going to pay. many points above that in interest rates, depending upon your credit and collateral. That's, you know, that's involved with the loan or the credit extension. He only had the data for the White House. He raised his hand and said, we need a bigger boat. We need a half a point cut.

15:22Michael Popok:But the other 11 were like, what do you know that I don't know? What do you know about the Trump White House that we don't know? That's sort of a scary moment when Stephen Mirren sort of, you know, everybody steps forward and he steps back. Now, the market is already hoping that had been hoping since Wednesday last week that there was going to be another couple of cuts between now and the end of the year to maybe even push rates, the interbank overnight rate set by the Federal Reserve below four. And they're already sort of pricing in that. That's why they freaked out when Jay Powell said today in his own inimitable fashion, there's no risk-free environment.

16:06Michael Popok:We don't know about rate cuts just yet. So we're going to continue to follow it. It's a little bit like the Oracle of Delphi, a little bit like, hmm, what did he just say? Let me translate that for you. But that's what we have to do and that's what we do here on the Midas Touch Network and on Legal AF. I'm glad you're here. Take a moment, hit the free subscribe button here on Midas Touch. Come over to Legal AF YouTube, do the exact same thing. You want to become a full-fledged card-carrying member of Legal AF? join our sub stack become a paid member of the legal af sub stack as well so until my next report i'm michael popock can't get your fill of legal af me neither that's why we formed the legal af sub stack every time we mention something in a hot take whether it's a court filing or a oral argument come over to the sub stack you'll find the court filing and the oral argument there including a daily roundup that i do call wait for it morning af what else all the other contributors from Legal AF are there as well.

17:02Michael Popok:We got some new reporting. We got interviews. We got ad-free versions of the podcast and hot takes. Wear Legal AF on Substack. Come over now to free subscribe.

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