Over the minutes of the Fed, a shadow shaped Trump

JACKSON HOLE, Wyo. (Reuters) – Federal Reserve officials generally agreed on the next point at their last meeting: do not let people be wrong about what will happen next.

The minutes released on Wednesday revealed a hectic meeting on several fronts last month, when the divided Fed lowered interest rates for the first time in a decade. But the consensus for not revealing their intentions was clear and could show that President Donald Trump's regular headwinds have begun to influence the way the Fed communicates.

An undercommitment that risks driving markets aside – and attracting the attention of Trump, who has stopped claiming not just one but rate cuts and even a return to bond purchases from the world. era of the crisis to boost a slowing but still growing economy.

Overcommit, and this looks like a capitulation to the White House, could undermine the reputation of the Fed as an independent technical agency that does not take politics into account in its political decisions.

Still, Trump has been adamant, especially because market data leaves room for doubt about the future of US record expansion, which the Fed should act to support an economy that seems to be well-positioned for many. fronts.

It is safer in this situation to "be guided by the incoming information and its implications for the economic outlook" and avoid "any appearance of following a predefined course" of further rate cuts, ie to remain silent .

At the last meeting, the Fed voted in favor of a reduction in the key rate of 25 basis points, revealed the minutes of the meeting released Wednesday.

Some wanted no reduction and two voting members disagreed. Some wanted a half-point cut and, in the last set of economic projections by policy makers, a near majority said rates should fall further by the end of the year.

But since then, even in public, even those who wanted deeper cuts have reprimanded their language.

In a column published by the Financial Times on Wednesday, Neel Kashkari, chairman of the Fed in Minneapolis, has appealed to the Fed for it to use more "forward-looking forecasts" in terms of pledging not to raise rates – not the promise to reduce them.

In his first comments after the July meeting, St. Louis Federal Reserve Chairman James Bullard said the Fed would not react to trade policy changes: it had bought its "insurance" against the trade war of the administration by lowering the rates once. Now let's see how the economic data respond.

But the return to "data dependency" at this stage poses a dilemma for Fed Chairman Jerome Powell, who is due to speak Friday in front of what will be a highly watched appearance during the bank's annual political retreat. central in the mountains of Wyoming.

While bond markets are again sending an alarm signal on the short-term economic future, while short-term rates are rising above long-term rates, Powell may need to say more – about Fed projects or, at least, about the factors that influence his thinking.

"What Powell has to say on Friday will be much more important than these minutes," said Mary Ann Hurley, Vice President of Fixed Income Operations at D.A. Davidson in Seattle.

Is inflation too low or job gains too high to be sustained? If overseas data matters, will a recession in Germany trigger a decline in US rates?

"His main message will be to try to stop the panic in the fixed income markets without being perceived as a difficult prey," said Adam Posen, president of the Peterson Institute of International Economics. .

When they lowered rates in July, contrary to the usual idea of ​​a strongly consensual discourse on the reason, different decision makers seemed motivated by a mix of reasons.

The demands of the White House were not among them. Fed officials insist that they are not hostages to Trump. But he can hold their tongue.