Trump has criticized Powell for an entire year but was slapped in the face by new economic data. He was wildly wrong on inflation, interest rates, and Federal Reserve issues, while Powell's decisions were proven correct.
Last night, the U.S. released the latest data, with the annualized GDP growth rate for the third quarter at 4.3%, exceeding expectations. The inflation rate rose from 2.1% in spring to 2.8%. For most of this year, Trump and his supporters have fiercely criticized the Federal Reserve, demanding significant cuts in short-term interest rates. Trump even launched a fierce offensive, calling for rates to be lowered to 1% and below, while the federal funds rate target range was between 4.25% and 4.5%. The economy, however, did not face major issues. If the cuts Trump suggested had been implemented, inflation would have skyrocketed, the economy would have overheated, and long-term and mortgage rates would have surged, leading to stagflation and a sluggish housing market, causing significant losses for retirees.
This month, the Federal Reserve may lower short-term interest rates under political pressure from Trump. Fortunately, by 2025, he and his allies will not have completely taken control of the Federal Reserve, but 2026 is concerning. Powell's term ends in May next year, and Trump may nominate someone who listens to him as his successor. He also wants to fire Governor Lisa Cook.
In 2025, Trump will be constantly meddling, calling Powell a loser and blaming him for being too late in lowering interest rates. Vice President Vance is also making a fuss. They claim the economy is slowing sharply and blame the Federal Reserve, but the data proves them wrong. Inflation is still above the Federal Reserve's 2% target, the consumer price index increased by 2.7% over the past year, and the Cleveland Fed estimates the annualized inflation rate will rise above 3%. When Trump said inflation was zero in July, the U.S. bond market expected an average annual inflation rate of 2.5% over the next five years. Gold has risen over 70% to a new high, and silver has more than doubled; all this has happened during Powell's tenure.
There are false reports and analytical flaws in the interest rate market. Politicians and media often confuse short-term and long-term interest rates. The former affects short-term borrowing costs, while the latter is determined by an independent bond market and is heavily influenced by future inflation expectations. Companies, governments, and homebuyers rely on long-term interest rates. If the Federal Reserve lowers rates and the bond market fears economic overheating and rising inflation, lowering rates is meaningless. In 2024 and recently, when the Federal Reserve lowered rates, long-term interest rates rose. The yield on 10-year U.S. Treasuries has just risen to 4.19%, higher than before the rate cut.
Everyone has reason to worry about 2026, but there is no need to be overly pessimistic. Trump's political influence seems to be waning, with net approval ratings dropping to -15%. Some Republicans in Congress are starting to value the separation of powers. Trump may benefit from the verbal battles with the Federal Reserve in 2025, but the situation will be different if all of them are his loyal supporters next year. He may need to stop the attacks and find a scapegoat.
Finally, I want to mention that Sister Xu plans to ambush a potential coin with a high possibility of a strong surge, expecting a growth space of 7-10 times is not a problem. Friends who want to seize this big opportunity can scan the code below to share directly in the chat room.
