Is Trump Right About the Federal Reserve? 

Federal Reserve Analysed

Central banks, in particular the Federal Reserve, have been elevated by investors and analysts to a position once reserved for religion and academia.

Places where the brightest minds gather to consider and debate the challenges facing the wider society. More importantly, to identify solutions and offer sound and timely guidance in a world of increasing uncertainty.

Markets are almost paralysed in the run-up to the FOMC meeting, and every word and “dot plot” is analysed and re-analysed in an attempt to interpret and extract meaning.

The “all-seeing” Federal Reserve has spoken, and the solution and carefully considered guidance regarding the economic challenge is hidden somewhere in the minutes.

Yet, “we don’t know” is the message that the “brightest minds” have been communicating for some considerable time.

Weakening Economy

While the Federal Reserve seems fixated on inflation, and more specifically, the impact of tariffs on inflation, the broader economy is signalling weakness.

Consumer spending is in decline, and that in part reflects increasing weakness in the labour market.

While tariffs may result in increased prices for the consumer, the impact on inflation will likely be offset by a further decline in consumer spending.

The FMOC minutes provide updated projections for 2025 and 2026.

The GDP estimates for 2025 and 2026 were revised down. The unemployment rate estimates were revised up.

The Fed’s own assessment is signalling weakness in the economy, and that assessment alone should be a reason to shift to a rate-cutting position.

The U.S. is not immune to the globally synchronised weakness in the economy that has been evident for several years.

While the Federal Reserve may be proven correct in its assessment that the tariffs will be inflationary, the decision to hold rates will be at the cost of economic activity and economic growth.

The Federal Reserve is waiting for something to break before taking action. The risk is they sleepwalk the economy into stagflation.

Is it a surprise, therefore, that Trump is venting his frustration, in interviews and via his posts, with the Federal Reserve’s reluctance to cut interest rates?

Particularly when the response to why they’re not cutting rates can also be interpreted as “we don’t know”.

S&P 500 Key Levels

The S&P 500 opens in positive gamma today.

Little has changed from the start of last week. The gamma flip zone sits at 5888; the call resistance level is 6043, and the put support level is 5755.

Markets are digesting the impact of the U.S. intervention and ongoing hostilities between Iran and Israel. A retest of the gamma flip zone can’t be ruled out.