Powell talks about Capitol Hill this week with politics before and center

President of the Federal Reserve Jerome Powell Warm towards Capitol Hill this week, faced with increasing pressure outside and inside the central bank to start the thrust for lower interest rates.

Powell’s half -yearly testimony at Congress starts on Tuesday morning, while the head of the central bank presents the FED monetary policy report to the Fed Financial Services Committee. He will then go to the senatoric banking committee on Wednesday on Wednesday.

Generally, the compulsory sessions of the congress allow the president of the Fed to remove certain basic comments on the state of the economy and the monetary policy. Legislators then have the chance to ask questions, which can sometimes become hostile but which are rarely something serious.

But the backdrop of this appearance is different: not only President Donald Trump but also several managers of the White House increased heat On Powell to start lowering the rates, and now he faces two key officials who have spoken in recent days to say that they will likely promote a reduction in July.

This combination of factors buzzes Wall Street with the possibility that the Federal Free Market Committee normally without politics now sees part of its protective coverage eroding.

“There is a political influence that is starting to enter the FOMC,” Mohamed El-Erian, chief economic advisor of Allianz said on Monday.

El-Erian’s comments occurred shortly after the governor of the Fed, Michelle Bowman, said during a speech to Prague that She could see a case To start relieving policy next month as long as inflation data remains online.

Coupled Similar remarks Friday On CNBC of Governor Christopher Waller, it seems that there is at least a repression against the repeated declarations of Powell last week that the policy is well positioned for a more patient approach, because the pricing impacts take place.

In addition, Waller and Bowman are both named Trump dating from his first mandate, and the two were mentioned as potential candidates to succeed Powell next year.

“Now, suddenly, we have had two republican governors who came out with this notion of July, and they moved the market,” said El-Erian. “What I know is that Jay Powell will have a lot of difficulty trying to unify everyone on a message.”

Indeed, traders increased the chances of a decrease in July to around 23%, and 82% much more final behind a move in September, according to the CME group Fedwatch Gauge of long -term prices.

More immediately, Powell could have two controversial days in front of him while he tries to explain the position of the Fed in the face of what could be an antagonism on both sides of the alley of Congress. Following the example of Trump, the Republicans are likely to powell quiz on what the heist is for an easier monetary policy, while the liberal senator Elizabeth Warren (D-Mass.) exhorted Powell to cut too.

The problem with Trump’s call

However, Trump’s desire for dramatic cuts – he suggested at least 2 percentage points – it is unlikely that it gets materialized either.

In his CNBC interview, Waller said he wanted to “start slowly” with the cup. During the FOMC meeting last week, participants suggested that the end point or the terminal rate, because the rate of federal funds would be around 3%, or only 1.25 percentage points below the current level.

Beyond that, such dramatic movements could be counterproductive.

When the Fed has reduced a complete percentage point from September to December from last year, treasury yields have in fact increased, almost in tandem with discounts, as bond market investors at the cost of faster economic growth and higher inflation.

“The idea that the Fed does something and that there is an immediate transmission and that everything works exactly as it is supposed to function is only a myth,” said Jai Kedia, a researcher at the Cato Institute, a libertarian reflection group. “You know, people overflow the effect of the Fed on the economy, especially in an immediate way.”

However, the administration requests immediate measures from Powell, despite the fact that the president is only one of the 12 voters of the committee which establishes interest rates.

Bill Pulte, director of the Federal Housing Finance Agency, Posted Monday on X This momentum is “built for the immediate resignation of Powell” – that Trump did not ask – adding that “it is clear that Powell’s political bias against our great president must be examined”.

Fed’s mission

Kedia, however, said that the Fed White House Dramatic Action Request was irresponsible.

On the one hand, he said that the reduction in federal loan costs is not the work of the Fed.

“The Fed’s mandate is in fact to stabilize inflation and stabilize employment,” said Kedia. “We can debate if he should have this mandate, or to what extent he has managed to do so, but if you put him in charge of federal debt, you can also kiss this mandate.”

Like El-Erian, Kedia thinks that the Fed could start reduction rates, although market prices promote September rather than July for the first time. FOMC members were divided during last week’s meeting on the way and the extent of the cuts.

Kedia said that if Powell and the rest of the FOMC are planning to take a course that Trump is trying to push, this may lose the economy as well as his reputation.

“Now I think the rates are slightly too high, but the reason to reduce rates is essentially if you follow a monetary policy rule, or if you are considering advice from the macro-economy, which none will tell you that you have to reduce rates as much as President Trump wants them to be reduced,” he said. “A good economic case can be done so that the Fed should reduce rates, but that has nothing to do with the political aspect.”