Pressure campaign
Trump has repeatedly attacked the Fed since returning to office in January, blasting Powell — whom he appointed as Chair during his first term — as a “numbskull” and a “major loser” for not cutting interest rates more quickly.
The Fed withstood the pressure until September, when signs of a slowdown in the labor market emerged. It cut rates again in October, but Powell upset those expecting more easing soon by warning that another cut in December is by no means “a done deal.” Since then, several of his colleagues on the Federal Open Markets Committee have expressed reluctance to cut any further in December, pointing to an inflation rate stuck above the 2 percent target.
Usually, when the labor market weakens, so does inflation, but that hasn’t happened this time. At both of his last two press conferences, Powell noted that the Fed’s dual mandate of keeping prices stable while pursuing full employment were currently “in tension” with each other.
Hassett has presented a very different view, telling CNBC in November that “inflation has come way down” from the 5 percent that it averaged during Joe Biden’s presidency andthat “the trajectory is really, really, really good if you look at it.” That’s despite U.S. headline inflation actually rising in four of the last five months.
My good friend Ben
That is why many in Frankfurt see alternative candidates — including the dovish but experienced Fed Governor Christopher Waller — as far safer choices. Also still in the running, according to various sources, are former Fed Governor Kevin Warsh, BlackRock fixed-income chief Rick Rieder, and sitting Governor Michelle Bowman.
For decades, relations between the Fed and the ECB have been collegial and cooperative. Members of the small, globally connected circle of central bankers have long seen themselves as a kind of fraternity. During the height of the 2008 financial crisis, then-ECB President Jean-Claude Trichet liked to emphasize that closeness by repeatedly referring to Fed Chair Ben Bernanke as “my good friend Ben.”