What you’re not hearing about Trump versus Powell, and this week’s FOMC meeting

Monday, July 28, 2025
Donald L. Luskin

Powell lowered himself by fact-checking Trump, and looking like a clown in a hard-hat.

Update to Strategic View

Federal Reserve

The photo-op at the Fed’s headquarters under renovation gave strong visualizations to underscore Powell’s cost-overrun scandal. Facing a Trump gotcha, Powell fact-checked Trump’s claim the Fed is spending $3.1 billion, but implicitly admitted it was spending $2.7 billion, when all prior reporting had said only $2.5 billion – already an astonishing spend. Powell lowered himself by being disrespectful, which we already expect from Trump. Most important, Trump looked like a builder in his hard-hat, but Powell looked like Michael Dukakis playing soldier in an army tank. Powell will face at least one dissent at this week’s FOMC, perhaps more. He has lost his president and his committee, and with inflation quiescent he has lost the economics. The FOMC will soften its hawkish message, and Powell will have no choice but to give it voice. Market expectations will build back two rate cuts this year.

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US CPI/PPI

Monday, July 14, 2025

PPI Update:  Final demand up 0.06% for June and .019% three months at an annual rate. Tariffs are a tax on producers. So why are they not showing up at all in producer prices?

Core beat the consensus, headline was spot-on. We were expecting better. There's really nothing to see here — CPI is about at target YOY. Core ex-OER is well below target. But goods (tariffed) inflated slightly more in June than services (non-tariffed). Even though the difference between them is rounding error, confirmation bias is so strong that the consensus will continue to conclude that tariffs are inflationary. Or maybe the consensus will go even further, arguing that if services aren't further below goods, then tariffs are proliferating throughout the whole price structure. So much for our speculation that a palace rebellion of Fed officials seeking Powell's job would drive a rate cut at the July FOMC. That seems off the table now.