The Fed’s U-turn on rates is a reality check, not a sop to Trump

Has ‘Jay’ Powell gone wobbly, or does he know something we don’t? That was the question being asked after the US Federal Reserve, of which Powell is chairman, kept dollar interest rates on hold last week — rather than continuing to notch them upwards as it has been doing for two years — and hinted that the next move might actually be downwards.

Trade tension with China, the impact of Donald Trump’s government shutdown and the risk of a no-deal Brexit were all cited as ‘cross-currents’ affecting the decision, but pundits led by Wall Street ‘bond king’ Jeffrey Gundlach declared the Fed to be ‘caving in’ to the demands of the stock market and the President. Trump had been tweeting against Powell, the respected financier he appointed to the central bank chair a year ago, warning him not to make ‘yet another mistake’ with a rate rise based on ‘meaningless numbers’ (presumably that’s economic data) rather than market sentiment, which perpetually favours cheap money.