The Federal Reserve is used to navigating tight spaces. Usually it's the space between economics and expectations. In the week ahead the Fed will chart a course between caution and its credibility.
Perhaps the only thing more exciting for the stock market than an end to the trade war is the beginning of a new round of Federal Reserve interest rate cuts.
The central bank may signal an imminent round of rate cuts when it meets in the week ahead. Its interest rate setting committee meets for two days, culminating with a news conference Wednesday afternoon.
The agency can withstand and rightly respond to the economic pressures brought on by tariffs, but it would rather avoid the political pressures that have been building.
President Trump has made no secret that he thinks the Fed is wrong. He has called low inflation -- what most worries the Fed -- a "beautiful thing." He thinks the bank made "a big mistake" by raising its target short term interest rate four times in 2018. He has mused that the Chinese president is the head of that country's central bank and "he can do whatever he wants."
Today's Fed includes several Trump nominees, but not necessarily his fingerprints. "They're not my people," he said on CNBC last week of the Federal Reserve.
His successful nominees have been traditional Fed type personalities. It wasn't until the president floated Herman Cain and Stephen Moore as Fed governors that investors saw an overt effort to implant Trumponomics inside the bank's boardroom. Both Cain, a 2012 presidential candidate who denies accusations of sexual misconduct, and Moore, a conservative writer criticized for disparaging comments about women (and also for his economic philosophy), bowed out of consideration.
Trump's efforts to maneuver Fed policy from the inside may have stalled, yet his own trade policy seem likely to have more impact. The trade war with China and the herky-jerky threat of tariffs with Mexico can freeze business and consumers from making money decisions out of fear and confusion over what will come next.
While the Fed may be rightly concerned about a slowing economy and low inflation, the cost of a rate cut may also include some of its credibility.
About The Writer
Financial journalist Tom Hudson hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter @HudsonsView.
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