Fed Independence & Monetary Policy - Undermining the Fed's independence, established 90 years ago in 1935, poses a threat to its core function of setting monetary policy [2][3] - An independent central bank is crucial for maintaining a strong dollar and trust in US Treasuries as safe haven investments [5][6] - The Fed's primary legal obligation is to maintain purchasing power by controlling inflation, benefiting all citizens, especially low and moderate-income Americans [10][11] Potential Risks & Concerns - The editorial suggests potential risks if political influence compromises the Fed's independence, potentially impacting the US dollar and Treasury security [4][5][9] - Undermining Fed independence could lead to long-term threats to the health and viability of the US dollar and the US Treasury [9] Fed's Evolution & Adaptability - The Fed is continuously rethinking its monetary policy framework, with recent changes announced by Chair Powell [8] - While modernization is possible, maintaining an independent central bank remains the main goal [7][9]

We begin with the latest on the drama surrounding President Trump's decision to fire Fed Governor Lisa Cook. The Fed saying it would abide by any court decision on whether the president has the legal authority to make that move. Let's bring in Steve Leeman who spoke with another Fed member this morning, Steve, and uh he offered his thoughts on it.>> Yeah, I'm going to start off with what investors are most focused on, which is interest rates. New York Fed President John Williams in an exclusive CNBC intervi ...

Federal Reserve Independence & Governance - The Federal Reserve's independence is crucial for maintaining low inflation and economic/financial stability, shielding long-term decisions from short-term political pressures [4][5][6] - The structure of the Federal Reserve is designed to ensure independent policy makers make decisions affecting the economy over the longer term [5] - Central bank independence has proven valuable worldwide, leading to better outcomes for countries [6] Economic Outlook - GDP growth slowed to approximately 125% (one and a quarter percent) at an annual rate in the first half of the year, compared to around 250% (two and a half percent) the previous year [9] - The economy is undergoing an adjustment process, partly due to post-pandemic factors and policy changes, including trade policy [10] - The economy is expected to continue growing at an annual rate of 100% to 150% (one to one and a half percent) for the year as a whole, slower than the previous year but still with positive momentum [11] Labor Market Analysis - The labor market is currently solid, with an unemployment rate of 42% (four and two-tenths percent), which is historically low [13] - There has been a slowdown in the pace of hiring and payroll growth, partly due to a slower labor supply caused by reduced immigration [14] - Wage growth remains consistent with a solid labor market and inflation trending towards the 2% goal [19]

Let's get the latest on President Trump's efforts to remove Lisa Cook from the Federal Reserve Board. CNBC senior economics reporter Steve Leeman talked about it all day with us. Going to probably talk about it all day today, maybe the the rest of the week as well. We have some news, Leslie. Sources telling CNBC that Fed Governor Lisa Cook could file her lawsuit to overturn her firing by the president as soon as today in DC federal court. But the president saying yesterday he's already counting on having a ...

Market & Economic Outlook - The market's muted response to Fed actions may change, particularly concerning the president's ability to fire Lisa Cook [2][3] - Markets anticipate lower short-term rates, expecting it to benefit risk assets [4] - Potential for a stagflation scenario, characterized by recession and rising inflation, similar to the Nixon era [7] Interest Rate Dynamics - A 1 percentage point cumulative decline in the federal funds rate from September to December 2024 saw a 90 basis points increase in the 10-year yield [4][5] - If markets perceive a Fed rate cut as unjustified by inflation expectations, long-term yields may rise, diverging from short-term yields [10][11] - A 50 basis points interest rate cut by Jerome Powell in September of last year was perceived as politically motivated, leading to market skepticism [11][12] Potential Triggers for Yield Increases - Firing of Lisa Cook and replacement with a nominee favoring rate cuts could trigger yield increases due to potential dissents from Jerome Powell [15] - A higher-than-expected PCE inflation report, such as 3.1% instead of the anticipated 2.9%, could cause yields to surge [16] - Presidential stacking of the Fed with favorable nominees, undermining its independence, could also lead to yield increases [17] Timing - The period between September and the end of the year is identified as a potential timeframe for significant market events [18]

Interest Rate & Fed Policy - Potential changes in the Federal Reserve leadership, including the possibility of Lisa Cook being replaced, could influence the market's perception of interest rate policies [1] - The market anticipates that President Trump will appoint someone who favors lower interest rates when Powell's term ends next year [2] - The yield curve is steepening due to expectations of short-term rate cuts, which ironically could increase inflationary pressure in the long run [3] - The focus is on whether inflation is under control, given that governments globally have significant debt and desire lower yields to reduce debt servicing costs [8] - Rate cutting cycles have historically been negative for the equity market, with major corrections or bear markets occurring in six out of the last eight instances [9][10] Inflation & Bond Market - Despite pressure to lower rates, inflation may persist and could become a long-term issue [4] - The gap between the 2-year and 30-year Treasury yields has widened to its largest in several years [4] - If rate cuts stimulate inflation, long-term yields are expected to rise [7] - The bond market may challenge the Fed's policies by selling off, leading to higher yields [13] Global Economic Context - The trend of focusing on inflation being not under control and governments having massive debt piles is happening globally [8] - The Bank of England cut rates, but now they have inflation at an 18-month high, and bond yields have been rising [11] - There is a good chance that a rate-cutting cycle could be initiated because things are breaking down globally [12]

The Dow off by 60 points. And welcome back to Money Movers on CNBC. President Trump moving to fire Federal Reserve Governor Lisa Cook.It's his latest threat against Fed independence. Joining us now, former Fed Governor Frederick Mishkin and former acting chairman of the Council of Economic Adviserss Toamas Phillips. Gentlemen, good to see you today.The chief economist for New Century Adviserss, Claudia S, uh sent out a pretty attention getting post on X. She says, if we could pull this, pull this up now. Do ...

Monetary Policy & Economic Outlook - The industry remains agnostic on the relative likelihood and danger of inflation and unemployment [1] - The industry observes more pressure on politicization of the Fed than any time in generations [1] - The industry suggests tilting towards concern about maintaining confidence in the long-term commitment to price stability [1] - The industry hopes the Fed will continue to be very much data dependent [2] - The industry is watching carefully what happens both on the inflation statistics and on the unemployment statistics [2] - The industry recognizes some stagflationary impulses working through [2]

Federal Reserve Independence & Policy - The market's calmness is partly attributed to ambiguity surrounding the President's power to fire a Federal Reserve governor and the definition of "for cause" [5] - The core concern for markets is a potential rupture in Fed independence, which could impact decision-making within the central bank [12] - Questioning the Fed's independence could hinder its ability to make decisions aligned with its legislative mandate [13] - An independent Fed is crucial for a well-performing bond market and economy, requiring respect and protection [14] Potential Rate Cuts & Economic Outlook - The Fed chair indicated openness to a potential rate cut in September, but several factors warrant caution, including inflation running above target and upcoming tariffs [16] - The possibility of a rate cut is viewed as roughly 50/50, and there's no strong support for a campaign of rate cuts [18] - Political pressure leading to a rate-cutting campaign to meet the President's requests would be detrimental to the economy, bond markets, and the Fed's credibility [19] Legal & Political Considerations - The legality of the President's actions and whether the alleged cause is sufficient for dismissal will likely be determined by the courts [2][4][10] - If the court ratifies the move, it would significantly impact Fed independence and trust in the institution as inflation fighters [19] - Accommodating political pressure for continuous rate cuts could shake the Fed's credibility, weaken the dollar, and impair the ability to finance US debt [21]

Fed Independence and Political Pressure - Lisa Cook refuses to resign, disputing President Trump's authority to fire her, stating there is no cause for her dismissal [1][11][12] - The market is concerned about political pressure influencing the Fed's decisions, raising questions about the Fed's independence [4][5] - The industry expresses nervousness about potential political interference, including concerns about the Bureau of Labor Statistics [9] - The market will factor in a more dovish Fed, especially after Jerome Powell's term [6] Monetary Policy and Market Reaction - One rate cut of 25 basis points is expected at the September meeting [3] - The labor market is showing signs of weakness, suggesting the Fed should not be too behind the curve [4] - Short-term market euphoria may occur due to expected lower rates, but long-term investors are more concerned about the overall impact on the US economy [7] - Investors are closely watching data and market conditions to adjust their rate cut expectations [5]