Will Trump install a president -president to get lower rates?
What is a president of the shadow -fed President?
I will present this theory in simple conditions, because it can become relevant as trade agreements falter and the economy will deteriorate without the decisive intervention of the Federal Reserve.
Imagine a scenario in which President Trump – who does not want Powell to continue in his role as soon as his term of office chooses to nominate a specific person to substantiate Powell before he leaves. Let’s call this person X. With a consistent story, this figure starts to deal with the media extensively, with the emphasis on their intention of reducing the rate of the Fed Funds and the lower mortgage interest rate.
While X currently has no power, this president -president effectively offers the markets. This communication sends a clear message that as soon as X rises to power, a shift in monetary policy is imminent, thereby creating anticipation and possibly influences economic behavior, even before official changes take place.
Will other FED presidents participate?
We have recently studied the mandatory issue of a potential Fed Civil Waremphasize how certain FED presidents, traditionally tailored to conservative principles, have shifted to my ‘work on inflation’ camp.
Although not all FED presidents support this shift, consider the consequences if X argues for aggressive rate reductions and other monetary tools and support for even some fed presidents. This scenario looks like an Old-school PowerGreep and it can become a reality if Fed Presidents Waller and Bowman join this choir. They will eventually reflect the feelings of the next FED president and you will have more than one voice that tells the markets that more aggressive measures are taking place.
Conclusion
In the coming months, the US could see in a recession in the loss of jobs, which could force the FED to lower the rates, regardless of the inflation data. However, if we continue to struggle between Trump and Powell, the possibility of a shadow -fed president increases. This person would tell the markets to get ready for more aggressive cuts.
Now, perhaps the FED aggressively reduces rates and he uses other tools to stimulate the economy in itself-I am to compliment Trump to compliment Powell as he did during COVID-19. However, if that does not happen, do not be surprised to see how a president of the Shadow Fed enters the scene.
