On the Powell/Trump Deal Memo

Powell and Clarida dined at the White House last night with Trump and Mnuchin. A Fed press release documents the event, and reads like a “deal memo” for the Christmas Eve accord we believe Trump and Mnuchin reached with Powell. Just as the Supreme Court changed its policy stance to ward off FDR’s 1937 threats to its independence, so the Fed has agreed to come off “automatic pilot” and commit to decisions made “entirely on incoming economic information.” The memo masterfully preserves everyone’s dignity. But it memorializes Powell’s promise of “patience” and “caution” in exchange for Trump’s forbearance, and confirms that a major economic risk really is off the table.