Bessent Suggests Powell Should Leave Fed Board in May

Economic

Summary:

Treasury Secretary Scott Bessent suggested Jerome Powell should step down from the Fed board in May 2026. Trump seeks a dovish successor amid rising pressure and ongoing Fed leadership speculation.

US Treasury Secretary Scott Bessent suggested that Federal Reserve Chair Jerome Powell should step down from the central bank’s board when his term as chair is up in May 2026.

“Traditionally, the Fed chair also steps down as a governor,” Bessent said in an interview with Bloomberg Television Tuesday. “There’s been a lot of talk of a shadow Fed chair causing confusion in advance of his or her nomination. And I can tell you, I think it’d be very confusing for the market for a former Fed chair to stay on also.”

Powell’s term as a Fed governor doesn’t end until January 2028, leaving it possible for him to remain at the central bank — and to participate in monetary policymaking — even after his tenure as the chair comes up next May. Powell has repeatedly declined to answer questions on whether he might stay on as a governor. That reticence has complicated the decision-making for President Donald Trump and his aides as they look to revamp Fed leadership next year.

“There’s a formal process that’s already starting” with regard to identifying the nominee to become next Fed chair, Bessent also said. “There are a lot of good candidates inside and outside the Federal Reserve.”

Asked whether Trump has asked Bessent himself to serve as Fed chair, the Treasury chief said, “I am part of the decision-making process.” He noted that “it’s President Trump’s decision, and it will move at his speed.”

Inflation Trend

Treasuries dropped after Bessent’s remarks, with two-year yields hitting a session high of 3.93%. The Bloomberg Dollar Spot Index pared losses and was little changed as of 8:25 a.m. in New York.

Unless Powell makes clear he’ll vacate his board position, Trump has one scheduled opening to fill next year, with Governor Adriana Kugler reaching the end of her term in January. Bessent said last month that one potential timeline would have a Fed chair name emerge in October or November, ahead of that January opening on the board.

Trump has made clear that he wants Powell’s successor to be someone who favors lowering interest rates. He has repeatedly blasted the Fed chair for standing fast on rates since he took office, after lowering them last year. Central bank policymakers have said they’re worried the president’s tariff hikes will push up inflation, and prefer to gather more information before opting to resume rate reductions.

The latest reading on inflation is due Tuesday morning, with the June consumer price index. Bessent said he hadn’t looked at the release in advance of his appearance on Bloomberg, but said “I wouldn’t put too much emphasis on one number.” He pointed to the recent trend of inflation numbers that show fears about a “substantial price level rise” haven’t been substantiated.

Building Flap

“They’ve had some big forecasting errors,” with regard to the economy, Bessent said of the Fed. “And this may be one” as well, he added. Even so, Bessent highlighted that Trump has said “numerous times he is not going to fire Jay Powell.”

Among the likely contenders to succeed Powell as chair are former Fed Governor Kevin Warsh and Trump’s current National Economic Council director, Kevin Hassett, along with Bessent himself. Investors have also focused on current Fed Governor Christopher Waller, who Trump appointed to the board in his first term and who has been open to the idea of lowering rates as soon as this month.

Pressure on Powell has risen further this month, with a number of Republicans attacking him over cost overruns in the refurbishment of two historic buildings controlled by the Fed. Some have used the issue to argue it gives the president legal cause for dismissing the Fed chief.

Hassett, when asked in an ABC News interview Sunday whether the president has the authority to fire the Fed chair, said, “That’s a thing that’s being looked into. But certainly, if there’s cause, he does.”

Bessent, asked about Hassett’s remarks, pointed again to Trump’s comments that he wasn’t looking to fire Powell.

Source: Bloomberg

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Devin

Economic

US President Donald Trump said he reached a deal with Indonesia, without providing any specifics of what is included in the accord.

“Great deal, for everybody, just made with Indonesia. I dealt directly with with their highly respected President. DETAILS TO FOLLOW!!!” the US president posted Tuesday on social media.

The announcement comes after the US president last week threatened to impose a 32% tariff on Indonesian goods starting Aug. 1. The country afterward sent its top trade negotiator to meet with Trump Cabinet officials in order to to secure an agreement.

Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto presented several business deals in meetings with US officials, including US Trade Representative Jamieson Greer, Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent, according to the ministry.

An agreement with Indonesia would be the fourth trade framework Trump has announced with foreign governments, after Vietnam and the UK. The US and China also reached a tariff truce that includes the planned resumption of critical minerals and technology trade between the world’s two largest economies.

Pacts announced by Trump have thus far fallen short of full-fledged trade deals, with many details left to be negotiated later. Vietnam’s leadership was caught off guard by Trump’s declaration that Hanoi agreed to a 20% tariff, and the Southeast Asian country is still seeking to lower the rate, according to people familiar with the matter.

Source: Bloomberg Europe

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Adam

Forex

Market reactions have been very muted and mixed, even if the CPI report came out with a small but positive surprise.For those who are discovering the number, US Headline CPI came in as expected (0.287 unrounded Headline vs 0.30% expected).

The Core number was however the more welcomed surprise, coming in at 0.2% (0.227%) vs 0.3% expected – This is what the FED prefers for their decisions.For Canadian Data also, CPI Came in as expected (1.79% y/y, slightly stronger core)Reactions have been a bit underwhelming overall, not what could have been expected. Nonetheless, more participants will be coming into the Market at 9:30 for the open, which may trigger some further volatility, totally absent for now.Markets will need bigger surprises to move more, and except for Nasdaq and S&P Futures that are rising (slowly) on the news, it seems that players are waiting for something else to be on the move.Let's take a look at US Dollar charts to see where we are after the CPI report.

Dollar Index 4H Chart

The Dollar has been grinding upwards since the 1st off July, now hanging around the 98.00 handle since yesterday with buyers showing some hesitancy.

It could have been assumed that participants would await for the number to move forward with the Dolalr buybacks, but for now the 4H Candle is a doji.Look at the 98.00 PIvot Zone (+/- 15 pips) for immediate strength:

A break above would point towards a test of the 98.50 level that was key support on the way down, the next main resistance is closer to 99.00

A break below would look to test the 97.60 Support in confluence with the bottom of the Upwards Channel from this month that will need to hold to avoid resuming the main downtrend.

Dollar. Index 30M Chart

Looking closer shows further the lack of volatility from the data, with the Dollar Index confined within at 80 pip range – Other currencies have shown some wicks but no immediate reactions.

Data high in DXY: 98.15 – Low: 97.35, watch for any breakout beyond these points.

We will follow closely what the market is waiting for to start moving as the North-American session is still young and somne geopolitic turmoil might start to be into play between Ukraine and Russia - keep an eye on the news.

Source: marketpulse

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Blue River

Forex

Technical Analysis

The USDCAD has spent the past six trading days consolidating in a tight range between 1.3651 and 1.3710. On Monday, the pair moved up to test the top of that range but met sellers once again. The subsequent dip found support near 1.36697, matching yesterday’s low (and a swing low from Friday as well), before rebounding higher in today’s U.S. session on renewed dollar buying.

The pair is now once again testing the 1.3707–1.3710 resistance zone, which has capped multiple rallies since last Tuesday. Although Friday's spike—driven by U.S. tariff news—briefly pushed the pair above this area, the run higher could not be sustained for long, and buyers quickly pushed the price lower, and reestablished the 1.3710 level as resistance. That failed breakout further reinforces 1.3710 as a critical barrier.

A break and close above 1.3710 would strengthen the bullish case with work to do. The 38.2% retracement at 1.37208, followed by a test of last week’s high at 1.3730 would still need to be broken -and stay broken - to add to the bullish momentum.

On the downside, if sellers lean, watch for support at the 100-hour MA (1.3687) and the 200-hour MA (1.3659). A move below both would shift the short-term bias back in favor of the sellers.

Bottom line: Momentum is tilting higher, but a decisive move above 1.3710 is needed to confirm a bullish breakout. Until then, traders remain stuck in a range awaiting a catalyst.

Key technical levels:

● Resistance: 1.3707–1.3710 (July highs), 1.3730 (Friday high), 1.3759 (next swing level)

● Support: 1.3687 (100-hour MA), 1.3659 (200-hour MA), 1.3631

A confirmed break above the current resistance zone would turn the short-term bias bullish. Traders remain on alert for follow-through.

Source: ForexLive

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Adam

Economic

The Federal Reserve will likely be able to start cutting short-term borrowing costs by September, traders continued to bet on Tuesday, after a government report showed a widely expected increase in consumer prices last month.

The market-priced probability of a Fed interest-rate cut by September remained around 60% after the Bureau of Labor Statistics reported that the consumer price index rose 2.7% in June from a year earlier, and underlying inflation was up 2.9%.

Traders continue to see just a 5% chance of a rate cut this month, with Fed policymakers mostly saying they want to see more data before reducing rates.

Source: Reuters

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Adam

Economic

The recent trend of “disinflation” in US CPI, or fading price pressures, is likely to at least partially reverse this month. Here’s what to expect from today’s report:

US CPI Key Takeaways:

US CPI expectations: 2.7% y/y headline inflation, 3.0% y/y core inflationThe recent trend of “disinflation”, or fading price pressures, is likely to at least partially reverse this month.

The price action in the US Dollar Index could potentially set the stage for the greenback to roll over for another leg lower, especially if inflation comes in below expectations.

When Is the US CPI Report?

The US CPI report for June will be released at 8:30 a.m. ET (12:30 p.m. GMT) on Tuesday, July 14.

What are the US CPI Report Expectations?

Traders and economists are projecting headline CPI to come in at 2.7% y/y, with the core inflation (ex-food and energy) reading expected at 3.0% y/y.

US CPI Forecast

US inflation, at least on an annualized basis, has moderated nicely toward the Federal Reserve’s 2% target so far this year. From a starting point of 3.0% y/y, the headline Consumer Price Index (CPI) fell as low as 2.3% two months ago before ticking up again last month. Meanwhile, Core CPI, which filters out more volatile food and energy prices to better show the underlying trend in prices, has receded from 3.3% to hold at a 4-year low of 2.8% y/y in each of the past three months.

That’s the good news for the Fed. The bad news is that the trend of “disinflation”, or fading price pressures, is likely to at least partially reverse this month.

As we noted last week, the culprit is more of a mechanical issue than anything: Every month, the year-over-year inflation rate is recalculated on the basis of the last 12 month-over-month readings as the one-year-ago reading (in this case, last June’s -0.1% print) falls out of the calculation and a new monthly reading is added.

With a -0.1% m/m CPI reading dropping out of the calculation, anything higher than that – even a flat 0.0% m/m print – will drag the annualized inflation reading higher in a so-called “base effect.” This month marks the peak impact of this phenomenon, with four months of 0.2% m/m readings set to replaced after this month.

Of course, the Federal Reserve and other policymakers are well aware of the base effect phenomenon, but with the still looming threat of century-high tariffs on the rest of the world, Jerome Powell and Company can’t afford to be seen cutting interest rates while inflation is “rising.” That’s why traders are pricing in only a sliver of a chance (~5%) of a July reduction in interest rates:

CPI Preview: Could Core Inflation Bounce Back to 3.0% YoY?_1

As many readers know, the Fed technically focuses on a different measure of inflation, Core PCE, when setting its policy, but for traders, the CPI report is at least as significant because it’s released weeks earlier. As we noted above, CPI has generally ticked lower so far this year, but it remains stubbornly above the Fed’s 2% target:

Looking at the chart above, the “Prices” component of the PMI reports has accelerated sharply higher over the last couple of months, and even before the Trump administration’s tariffs were formally announced (and subsequently paused). Despite signs of slowing economic growth, firms are having to pay up for goods and services amidst the ongoing uncertainty around trade policy, likely putting upward pressure on the CPI report in the coming months.

CPI Preview: Could Core Inflation Bounce Back to 3.0% YoY?_3

The US Dollar Index (DXY) has been grinding higher throughout the month of July to test the year-to-date bearish trend line near 98.00 as of writing.

So far, the counter-trend bounce has lacked substantial velocity, merely alleviating the oversold condition on the 14-day RSI without breaking the recent range (yet). This price action could potentially set the stage for the greenback to roll over for another leg lower, especially if inflation comes in below expectations.

Technically speaking, the April low around 98.00 is the most important previous-support-turned-resistance level to watch, whereas the nearest clear level of support comes from the early July low at 96.40.

In the current environment with the Fed almost certainly on hold until September, tariff headlines and any potential trade deals (especially with China) may be bigger market movers than this month’s inflation report, so it’s key to monitor developments on those fronts as well.

source : investing

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Thomas

Economic

The June consumer price inflation report shows a 0.3% month-on-month reading for headline inflation (0.287% to three decimal places) and a 0.2% MoM outcome for core (0.228%) versus the consensus forecast of 0.3% for both. The details show that there was some scattered evidence of early tariff impacts on some goods components – mainly fresh fruit & vegetables, household appliance, toys, clothing and sporting goods, but this was offset to a large extent by softness in the all-important shelter component, which has an approximately 40% weighting within the core CPI basket. It rose only 0.2% MoM while new vehicle prices fell 0.3% and used cars fell 0.7% despite fears that this could be a source of inflation in coming months given substantial tariffs being applied to the sector. Airline fares fell yet again, but only by 0.1% MoM this time.

Core CPI MoM%, 3M annualised and YoY%

Source: Macrobond, ING

More ammunition for the President, but that will change

This sub-consensus core CPI figure may give President Trump an excuse to launch another salvo at Jerome Powell, but we always suspected it would be three months from April/May before the tariffs show up in force. That means the July, August and September CPI reports are where we will see the potential for 0.4%+ MoM prints. President Trump has been pushing the Fed to cut rates by 200bp to 300bp immediately, and two of his appointees to the FOMC from his first presidential term (Chris Waller and Michelle Bowman) suggested they could vote in favour of a cut as soon as the July FOMC meeting. However, the rest of the committee feels they have time to wait, especially in light of the recent firmer-than-expected June jobs report.

Fed doesn't want to get it wrong again

The Fed was stung by criticism after suggesting the post-pandemic supply shock price hikes would be “transitory”, only for inflation to hit 9% in 2022. We suspect a majority of FOMC members will want to ensure that tariffs are a one-off price change rather than something that leads to greater permanence in inflation. We doubt they will have enough evidence to be certain of that by the September FOMC meeting, so we would need to see some significant weakness in jobs to trigger a rate hike at that point. That suggests the president’s frustrations with Jerome Powell will intensify, with him set to seek a more dovish replacement for when Powell's term as Fed Chair ends early next year.

Housing could become a major source of disinflation late 2025/early2026

Source: Macrobond, ING

Fed to wait, but cut by 50bp in Decemben

Nonetheless, interest rate cuts will eventually come. The cooler growth environment with a softer jobs narrative and weakening wage pressures will help ensure that inflation is indeed temporary. Moreover, the shifting dynamics of the housing market will mean housing costs, which have been a major driver of inflation in recent years, will increasingly become a source of disinflationary pressure as hinted at in the chart above using the Cleveland Fed’s new tenant rents series. With the risk that unemployment does start to climb later in the year in response to intensifying growth headwinds, we believe the Fed will be much more comfortable with cutting interest rates from the December FOMC meeting, kicking off with a 50bp move.