Trump 1, Powell 0

Powell has recanted his October 3 statement that the funds rate is "a long way from neutral." We have always seen this as a mere gaffe, and now it is officially corrected. Powell has done it under pressure from a consensus that has moved the forward funds rate down to a mere two hikes over three years. Trump has stepped up his criticism of Powell, yesterday making it personal for the first time. Powell’s recantation following that shows Trump as being effective in a matter with which markets strongly agree, a boost to sentiment after the mid-terms and before Trump's summit with Xi. A December hike is still in the cards, but after that, Powell has now been clear that further hikes are contingent on growth causing the Fed to believe that the neutral rate is moving higher. The December FOMC statement will find a way to reflect that.