The Weekly Update 8/08/2025™
Written by Brittany Jarocki CFP, (Jim's business partner, daughter and the succession plan Jim hopes he never needs).
The Federal Reserve’s mandate is to pursue full employment and stable prices as an independent operation. Key word there is independent i.e. without the influence of the President or Congress.
This proves to be a tall task, as the executive branch often pushes for lower rates. Previous administrations from Reagan to Obama have done this, and of course, now the Trump administration is making it clear that the want lower rates.
Fed Chair Jerome Powell has maintained that the Fed makes decisions based on economic data and is not willing to be persuaded to lower rates based on anything else.
This, however, appears to be a lose-lose scenario for J Powell.
In the event that the US economy slows significantly in the second half of the year, Powell will be blamed for keeping rates too high for too long and restricting the economy.
If we see continued strength in the second half of 2025, the current administration will gladly take all of the credit for tariff success and the passing of One Big Beautiful Bill.
If I were Jerome Powell, I would begin to recognize this. Powell has 10 months remaining in his term before he is replaced by a Fed Chair successor. Why not shorten that by 9.75 months, resign, and “leave that for them”. The Trump administration would then appoint the next Fed Chair and anything that happens in the economy from there on out, positive or negative, would have to be owned by the administration.
Powell staying in his current position/predicament will not make him look better in any way. In fact, any decision he makes (even if the decision is to do nothing), is in direct contention with the view of Fed independence.
If Powell lowers rates, he runs the risk of appearing to give into Trump’s persuasions.
If he raises rates or leaves them as-is, he appears stubborn and only choosing this path in defiance.
Powell’s resignation would maintain the independence of the Fed by removing any perception of influence, alleviating himself from the political limbo he is in, as well as protect the independence of the Fed from political intervention down the road.
I’m interested in your thoughts, comments and observations. Feel welcome to call, email, or stop by the office and say Hi.
Respectfully,
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
*The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
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