The Powell put and Trump’s gut

Fed Chair Jerome Powell's language earlier this week prompted some in the markets to claim he had taken a sudden dovish turn, possibly in response to pointed criticism from President Donald Trump. We suspect that Powell was simply trying to row back his off-the-cuff suggestion last month that interest rates were still a long way below neutral, which always looked odd when the Fed had recently stopped describing the stance of policy as accommodative. More generally, the comments this week from Powell and Vice Chair Richard Clarida didn't suggest that the Fed is considering a near-term pause in its rate tightening cycle.