Slate Money Jay Powell’s Tough Call
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Apr 19, 2025 This week features Cardiff Garcia, Editorial Director of the Economic Innovation Group and host of The New Bazaar podcast. He discusses how Fed Chair Jay Powell is resisting Trump's tariff pressures while navigating a complex economic landscape. The conversation dives into the politicization of the IRS, including potential consequences of its gutting. Additionally, they examine the escalating trade war with China and its economic implications while keeping the tone light with humor and personal anecdotes.
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Fed Chair Firing Risks Stability
- Firing Fed Chair Powell would make him and successors directly accountable to Trump, undermining Fed independence.
- This threatens economic stability as interest rate decisions could become politically driven toward lower rates regardless of inflation.
Interest Rate Cuts Can Backfire
- Cutting interest rates in a stagflation scenario risks higher inflation due to supply shocks from tariffs.
- Inflation expectations might become entrenched, leading to self-fulfilling inflation increases.
Fed Communication Balances Guidance
- Predictability and transparency in Fed communication increase market confidence.
- Powell tries balancing realistic guidance with flexibility, breaking from overly precise mechanical rules.