President Donald Trump hasn’t had a terribly good January. But he is closing the month with one victory.
After losing the shutdown battle against House Speaker Nancy Pelosi, the president can claim victory in another high-stakes confrontation.
He’s pushed back for months against Fed Chairman Jerome Powell, and the central bank more broadly, for raising interest rates.
On Wednesday came total surrender. The Fed is done hiking rates — even suggesting, after a hike in December — December — that the next move could be lower.
The Fed has started a process to taper the balance-sheet runoff by way of a special statement.
“Is the rate-hike cycle over?” Powell was asked. “We’ll know in hindsight,” he replied.
Now, OK, there were other factors besides Trump’s persistent complaints leading the Fed to its new stance. For one, the stock market SPX, +1.55% had a petulant sulk, dipping into correction territory.
Trump’s trade war has derailed the China growth story and the U.S. exporters who rely on the world’s second largest economy for revenue growth.
The Brits can’t seem to agree on an orderly path out of the European Union. The U.S. just had its longest government shutdown on record. Inflation readings, and measures of inflation expectations, have receded a bit.
So Powell can declare that he and his Fed colleagues are just, to borrow a phrase he employed a few times, “doing the right thing,” and there’s evidence to support him.
All that said, Powell could have looked at the same information and not budged so much. Remember the proclivity for his predecessors, Ben Bernanke and Janet Yellen, to use the word, “transitory.” The Fed doesn’t have to react to a single month’s turbulence.
Powell could have looked at all these “crosscurrents,” to use another word he employed, and also seen a U.S. economy that added 312,000 jobs in December and possibly some 200,000 more in January.
For sure, it would have been ill-advised for the Fed to hike interest rates here. But Powell was under no obligation to reverse course so thoroughly.
1600 Pennsylvania Ave. hasn’t rung up many victories, but it can claim a notch here.
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