Did the Fed and the White House Come to a Meeting of the Minds?

On November 18, President Donald Trump invited Federal Reserve Board Chair Jerome Powell to meet at the White House with him and Treasury Secretary Steve Mnuchin. Afterwards Trump tweeted, “Just finished a very good & cordial meeting at the White House with Jay Powell of the Federal Reserve. Everything was discussed including interest rates, negative interest, low inflation, easing, Dollar strength & its effect on manufacturing, trade with China, E.U. & others, etc.”

While the Fed released a statement saying that the meeting covered “the economy, growth, employment and inflation,” the Fed said Powell’s remarks “were consistent” with those he made at last week’s congressional hearings. “[Powell] did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming information that bears on the outlook for the economy.” Powell told the president that monetary policy decisions will be “based solely on careful, objective and non-political analysis,” the statement said.

Zach Abraham, principal/CIO at Bulwark Capital Management, told reporters at the Bondbuyer.com that, “This is simply a case of Trump throwing everything at the Fed but the kitchen sink. If we really want to keep China in check, the Fed and the White House must be on the same page. Beijing and the PBOC have strategically exploited Fed Independence and the inherent lag between monetary policy and economic reality on the ground.

“I’d assume Trump is merely trying to close this gap and make nice with Powell as he’s realized the need to be on the same page. I just don’t think the White House has realized that lower U.S. rates and a lower dollar are precisely what Beijing wants,” said Abraham.

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