Why Jerome Powell was right all along about interest rates, inflation and the economy

Core Viewpoint - The article discusses the potential implications of Trump's influence over the Federal Reserve, particularly regarding interest rate policies and economic conditions in the coming years, highlighting concerns about inflation and the Fed's independence. Group 1: Economic Data and Trends - The U.S. economy showed stronger-than-expected growth in the third quarter, with GDP increasing at an annualized rate of 4.3%, surpassing expectations [6] - Inflation rose to 2.8% from 2.1% in the spring, indicating persistent inflationary pressures above the Fed's 2% target [6][8] - The consumer-price index increased by 2.7% over the past year, with the annualized inflation rate estimated to be back above 3% [8] Group 2: Federal Reserve and Interest Rates - Trump has criticized Fed Chair Powell for not cutting short-term interest rates sufficiently, labeling it as "monetary malpractice" [1][5] - The Fed's short-term interest rates, which influence various borrowing costs, are distinct from long-term rates set by the bond market, which are affected by inflation expectations [11][13] - A cut in short-term rates by the Fed could lead to rising long-term rates if the bond market perceives an overheating economy, as seen in 2024 when the yield on 10-year Treasury bonds rose to 4.19% [14] Group 3: Political Influence and Future Outlook - Trump's term as Fed chair ends in May, and he is expected to nominate a loyalist, potentially increasing his influence over the Fed [2] - Despite Trump's declining political clout, with a minus-15% approval rating, there are concerns about the Fed's independence if more loyalists are appointed [15] - The article suggests that Trump's previous demands for rate cuts were politically motivated, allowing him to blame Powell if the economy faltered, but the current economic performance complicates this narrative [17]