Trump Down to '3 or 4' Candidates to Replace Powell as Fed Chair

Economic

Summary:

President Trump says he's considering three or four candidates to replace Fed Chair Jerome Powell, whose term ends in 2026, calling Powell "terrible" and renewing pressure for aggressive rate cuts.

President Trump told reporters that he is actively considering replacements for Federal Reserve Chairman Jerome Powell, and that he is down to three or four candidates.

"I know within 3 or 4 people who I’m going to pick," he told reporters adding of Powell "he goes up pretty soon fortunately because I think he's terrible." Powell’s term as chair expires in May 2026.

The comments from the president during a press conference in the Netherlands came at the same time as Powell sat before Senate lawmakers about 3,800 miles away in Washington for his second day of regularly scheduled testimony before Congress.

The consideration of Powell replacements comes after a period of intensifying pressure from Trump to consider rate cuts as the chairman’s guarded wait-and-see monetary policy stance continues to inflame tensions with the White House.

The president's attacks intensified at the end of last week as Trump called for rates to drop from 4.25% to 4.5% to between 1% and 2% and said of Powell and the Fed's board of governors: "I don't know why the Board doesn’t override this Total and Complete Moron!"

Trump repeated some of those points in a Tuesday social media post, calling for rates "at least two to three points lower" and saying that Powell "will be in Congress today in order to explain, among other things, why he is refusing to lower the Rate."

"I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come."

On Wednesday Trump reiterated his oft-stated case of why Powell should lower rates by at least one percentage point immediately, citing "no inflation."

He also recounted an earlier face-to-face meeting with Powell, offering a mocking voice for Powell, and repeated his personal attacks by saying "I think he's a very stupid person actually."

Powell told Senate lawmakers today that the central bank is "well-positioned to wait" on any interest rate adjustments until it has more clarity on how Trump's tariffs will affect inflation and the direction of the US economy. He delivered the same message to House lawmakers Tuesday.

Trump is not the only one calling for lower rates. Even some of Powell's fellow policymakers — Fed governors Michelle Bowman and Chris Waller — have said in recent days that they now see cutting rates as soon as the Fed's next policy meeting in July due to recent mild inflation readings.

But other officials have pushed back on that urgency and warned that it is too soon to know the true effects of tariffs on inflation.

Some names have already circulated in Washington as possible replacement for Powell. One is former Fed governor Kevin Warsh, considered by many to be a frontrunner for the job. Waller is another current Fed official considered by some central bank watchers as a possible pick.

Bloomberg has reported that the name of Treasury Secretary Scott Bessent is also now being circulated as a possible replacement for Powell.

Bessent told lawmakers earlier this month he would like to remain in his seat until 2029, but he did not dismiss the possibility of becoming the next chair of the Fed.

Bessent said he has "the best job" in Washington and is "happy to do what President Trump wants me to do," while noting that "I would like to stay in my seat through 2029" to help carry out the administration’s agenda.

Source: Yahoofinance

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Adam

Commodity

Gold and silver prices are slightly up in early U.S. trading Wednesday. While the geopolitical situation in the Middle East has significantly de-escalated at mid-week, there are still elevated worries and uncertainties regarding an uneasy Israel-Iran ceasefire. August gold was last up $7.00 at $3,340.90. July silver prices were last up $0.058 at $35.79.

Risk appetite is not robust at mid-week, but neither is risk aversion as a fragile Israel-Iran ceasefire appears to be holding. There are also now reports that the U.S. bombing of Iran’s nuclear facilities only set back Iran’s nuclear weapons program three to six months. The Trump administration denied those reports.

This week’s fluid geopolitical developments overshadowed a downbeat Conference Board U.S. consumer confidence reading for June—dropping to 93.0 from 98.4 in May. A Wall Street Journal survey expected the June reading to come in a 99.5. The forward-looking expectations index fell to 69.0 in June versus 73.6 in May. The Conference Board says a reading below 80 signals a U.S. recession. The June report suggests U.S. consumers remain very concerned about trade tariffs and their impacts on jobs, prices and inflation.

Said David Morrison of Trade Nation in a morning email dispatch: “It’s worth remembering that China-U.S. trade issues remain unresolved. Chinese Premier Li Qiang struck a cautionary tone overnight, urging global leaders not to let trade disputes become overly politicized. The remark underlined the fact that while the Israel-Iran hostilities and subsequent ceasefire have pulled the focus somewhat, other sources of tension continue to tick along under the surface, for now.”

Asian and European stocks were mixed to firmer overnight. U.S. stock indexes are pointed to narrowly mixed openings today in New York.

The key outside markets today see the U.S. dollar index firmer. Nymex crude oil futures prices are slightly up and trading around $65.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently at 4.293%.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential sales and the weekly DOE liquid energy stocks report. Fed Chair Powell today speaks to a Senate banking committee.

Source: kitco

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James Whitman

Central Bank

Political

U.S. President Donald Trump reignited his criticism of Federal Reserve Chairman Jerome Powell on Wednesday, speaking at the NATO summit. Trump said he plans to announce a replacement for Powell, whose term ends in May 2026, though it remains unclear whether he will attempt to remove him before then.

“I know, within three or four people, who I’m going to pick,” Trump said. “He goes out pretty soon fortunately, because I think he’s terrible.”

Trump again questioned Powell’s mental capacity, calling him a “very average person mentally.”

The president has repeatedly teased the idea of firing Powell in the past, dubbing him “Too Late” for his perceived slowness in cutting interest rates. Each time, however, Trump has backed off following negative market reactions.

On Tuesday, Powell tempered expectations for a potential rate cut in July, signaling a continued cautious approach.

“Policy changes continue to evolve, and their effects on the economy remain uncertain,” Powell said. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”

Powell’s remarks contrast with recent statements from at least two Fed governors who said they would support a July cut if inflation remains subdued.

Trump has publicly urged the Fed to slash rates by a full percentage point or more, arguing such a move could save the federal government billions - or even up to a trillion dollars - in interest costs.

Source: Investing

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Warren Takunda

Economic

The budget bill championed by President Donald Trump could complicate next year’s tax filing season after the IRS lost one-quarter of its employees through staffing cuts, an independent watchdog reported Wednesday.

The IRS workforce has fallen from 102,113 workers to 75,702 over the past year, according to the latest National Taxpayer Advocate report to Congress. The report Wednesday offered the first official numbers on the IRS job losses associated with Elon Musk’s Department of Government Efficiency.

Most of the employees took the “fork in the road” resignation offer from DOGE rather than waiting to get laid off.

Some of the findings from the report:

Taxpayers will likely see effects of staffing reductions

The Trump administration’s efforts to shrink the size of the federal bureaucracy to a mass exodus of probationary employees who had not yet gained civil service protections and were offered buyouts through a “deferred resignation program.” More than 17,500 IRS workers took that route. The biggest cuts were in taxpayer services, the small business/self-employed office and information technology.

The report noted that the Republican administration’s proposed budget includes a 20% reduction in IRS funding next year. That’s a 37% reduction when taking into account the supplemental funding in the Biden-era Inflation Reduction Act that Republicans previously stripped away.

“A reduction of that magnitude is likely to impact taxpayers and potentially the revenue collected,” wrote Erin M. Collins, who leads the organization assigned to protect taxpayers’ rights.

The 2026 tax season could be precarious

Collins said the 2025 filing season was “one of the most successful filing seasons in recent memory,” though she warned that the 2026 season could be rocky.

“With the IRS workforce reduced by 26% and significant tax law changes on the horizon, there are risks to next year’s filing season,” Collins wrote. “It is critical that the IRS begin to take steps now to prepare.”

She said that, halfway through the year, there were concerns that the IRS had not yet undertaken key preparation steps, including hiring and training seasonal and permanent employees.

Trump’s package could add new layer of problems

The report warned about the possibility of understaffing to manage new provisions from Trump’s legislative package if it’s enacted.

“Several provisions will retroactively affect the 2025 tax year, thus impacting millions of taxpayers and requiring the IRS to quickly update tax year 2025 tax forms and programming for the 2026 filing season,” the report said.

Specifically, the House bill retroactively prohibits the IRS from allowing or making payment of Employee Retention Credit claims filed after Jan. 31, 2024.

The report also said the IRS historically receives more calls in years following significant changes in tax law, so it may need additional employees and improved digital tools to maintain its level of service.

Identity theft cases are still piling up

The IRS is dealing with delays in resolving self-reported identity theft victim assistance cases — taking up to 20 months to resolve, the report said.

As of the end of the 2025 filing season, the IRS was handling about 387,000 of these cases.

That is a slight improvement from the more than 22 months it took to resolve identity theft cases, as noted in last year’s report, which outlined roughly 500,000 unresolved cases in its inventory.

“The cycle time remains unacceptably long,” Collins said. “I continue to urge the agency to focus on dramatically shortening the time it takes” to resolved identity theft cases, “so it does not force victims, particularly those dependent on their tax refunds, to wait nearly two years to receive their money.”

Source: AP

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Adam

Bond

Traders are ramping up options wagers that 10-year (^TNX) Treasury yields are poised to sink to the lowest since April, amid dovish comments from Federal Reserve officials and a backdrop of simmering Mideast tensions.

The focus of the bets, which have drawn at least $38 million in premiums across Friday and Monday, has been around August calls on US 10-year options. The positions hedge against a drop in 10-year Treasury yields to 4% in the coming weeks, from roughly 4.3% now.

Such a tumble would bring them to the lowest since the market turmoil that followed President Donald Trump’s April 2 announcement of unexpectedly steep tariffs on US trading partners. It would also mark a sharp reversal from peak levels above 4.6% seen in May, when mounting worries around government spending in the US and other major economies sent long-term yields soaring.

A big impetus for the bullish hedges came from Fed officials, including Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman, appearing to support an interest-rate cut as early as July. Chair Jerome Powell reiterated that patience on additional easing is still warranted in congressional testimony on Tuesday, but he said cuts would come “sooner rather than later” if inflation pressures remain contained.

Treasuries steadied on Wednesday ahead of Powell’s second day of testifying before the Senate Banking Committee. Yields on two-year tenors traded at 3.79%, the lowest level in seven weeks.

Bond Traders Boost Bets US 10-Year Yield Will Dive Toward 4%_1

Traders have been building bets on additional rate cuts into the front end of the curve. Swaps are now pricing around four basis points of easing into the July Fed meeting, compared with near zero before Bowman spoke, and a combined 60 basis points over the remaining four gatherings this year, up from 45 basis points a week ago.

A surprisingly weak reading on consumer confidence on Tuesday supported the options positions, pushing 10-year yields below 4.3% to the lowest since early May.

The bulk of activity in the options bets was seen Friday and Monday, when yields tumbled before Trump’s evening announcement of a ceasefire between Iran and Israel following more than a week of conflict.

Open interest, or the amount of new risk, has surged since Friday in the August 10-year call options. On Monday, one trade cost a premium of roughly $10 million for the 113.00 strike, which is equivalent to a yield of about 4%. Recent open interest data has shown the buying since Friday to be new risk, rather than covering existing positions.

Here’s a rundown of the latest positioning indicators across the rates market:

Bond Traders Boost Bets US 10-Year Yield Will Dive Toward 4%_2

JPMorgan Treasury Client Survey

In the cash market, JPMorgan Chase & Co.’s Treasury client survey for the week to June 23 showed outright long positions fell 4 percentage points, shifting into neutrals. The all-client survey now shows the smallest net long position in three weeks.

Most Active SOFR Options

In SOFR options across the Sep25, Dec25 and Mar26 tenors, there were some large positions formed around the 95.6875 strikes where both Sep25 and Dec25 puts proved popular. Flows over the week included large buying of the SFRU5 95.6875/95.625 1x2 put spread, the SFRU5 95.75/95.625 put spread and the SFRZ5 95.375/95.625 put spread.

SOFR Options Heatmap

The 95.625 strike remains most popular across Sep25, Dec25 and Mar26 options, with a large amount of risk seen in the level via Sep25 puts and Dec25 puts. Other populated strikes include 95.75 and 95.875, where Sep25 puts are prominent. On Monday, there appeared to be a wave of position unwinds via sellers of multiple downside structures across Sep25 and Dec25 1-year mid-curve structures, following the dovish comments officials including the Fed’s Bowman.

Treasury Options Skew

Treasury options skew now favors calls across the strip, signaling traders are now paying a premium to hedge against a bigger bond rally versus a selloff, from the front-end out to the long-end of the curve. Long-bond skew is now favoring call premium for the first time since April. In 10-year options, demand over recent sessions has emerged for upside protection targeting a move in 10-year yields down to near 4% level via August call structures.

Bond Traders Boost Bets US 10-Year Yield Will Dive Toward 4%_4

CFTC Futures Positioning

Net duration long positions among asset managers continued to rebuild in Treasury futures, CFTC data through June 17 shows. Over the week, asset managers added to net long positioning across 2-year, 10-year and ultra 10-year note futures by a combined $14.5m/DV01. Hedge funds added to net short position in 10-year note futures by around $4.9m/DV01, while covered a combined $4.6m/DV01 in net short positioning across long-bond and ultra-long bond futures.

Source: Bloomberg

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Michelle

Political

U.S. President Donald Trump revelled in the swift end to war between Iran and Israel, saying he now expected a relationship with Tehran that would preclude rebuilding its nuclear programme despite uncertainty over damage inflicted by U.S. strikes.

Trump, speaking in The Hague where he attended a NATO summit on Wednesday, said his decision to join Israel's attacks by targeting Iranian nuclear sites with huge bunker-busting bombs had ended the war, calling it "a victory for everybody".

He shrugged off an initial assessment by the U.S. Defense Intelligence Agency that Iran's path to building a nuclear weapon may have been set back only by months, saying the findings were "inconclusive" and he believed the sites had been destroyed.

"It was very severe. It was obliteration," he said.

He was confident Tehran would not try to rebuild its nuclear sites and would instead pursue a diplomatic path towards reconciliation, he said.

"I'll tell you, the last thing they want to do is enrich anything right now. They want to recover," he said.

If Iran tried to rebuild its nuclear programme, "We won't let that happen. Number one, militarily we won't," he said, adding: "I think we'll end up having something of a relationship with Iran to see (to) it."

RELIEF, APPREHENSION, EXHAUSTION

In Iran and Israel, residents expressed relief at the end of the worst confrontation ever between the two longstanding sworn enemy nations, but also apprehension over the future.

"We came back after the ceasefire was announced. People are relieved that the war has stopped, but there’s a lot of uncertainty about what comes next," said Farah, 67, who returned to Tehran from Lavasan near the capital where she had fled to escape Israeli bombing.

Her grandchildren were worried that the authorities would respond by imposing more severe enforcement of dress codes and other restrictions on social freedoms, she said by phone: "The world will move on and forget about the war — but we’re the ones who will live with its consequences."

In Tel Aviv, Rony Hoter-Ishay Meyer, 38, said the war's end brought mixed emotions - relief that children could return to school and normal life resume, but exhaustion from the stress.

"It's very much tiring. Those past two weeks were catastrophic in Israel and we are very much exhausted and we need to get back to our normal energy."

Israel's bombing campaign, launched with a surprise attack on June 13, wiped out the top echelon of Iran's military leadership, killed its leading nuclear scientists and targeted nuclear sites and missiles. Iran responded with missiles that pierced Israel's defences in large numbers for the first time.

Iranian authorities said 610 people were killed and nearly 5,000 injured in Iran, where the extent of the damage could not be independently confirmed because of tight restrictions on media. Twenty-eight people were killed in Israel.

A rapprochement between Tehran and the West would still require a deal governing Iran's long-term nuclear ambitions in return for lifting U.S. and international sanctions.

The head of the UN's IAEA nuclear watchdog, Rafael Grossi, said his top priority was ensuring international inspectors could return to Iran's nuclear sites, dismissing what he called the "hourglass approach" of trying to assess the damage in terms of months it would take Iran to rebuild.

"In any case, the technological knowledge is there and the industrial capacity is there. That, no one can deny. So we need to work together with them," he said.

Iran had notified the watchdog during the war that it was taking special measures to protect nuclear material, but in order to verify what had happened to it, inspections must resume, he said.

Trump's Middle East envoy, Steve Witkoff, said late on Tuesday that talks between the United States and Iran were "promising" and Washington was hopeful for "a long-term peace agreement that resurrects Iran".

Iran's parliament approved a bill on Wednesday to suspend cooperation with the IAEA, state-affiliated news outlet Nournews reported, but it added that such a move would require approval of Iran's top security body.

TRUMP BASKING AT SUMMIT

Hours after Trump announced the ceasefire, he claimed credit for preserving it by ordering Israel to halt further attacks with its planes already in flight. He used an obscenity on live television to say that the enemies had been fighting so long they did not know what they were doing.

Both Iran and Israel declared victory: Israel claiming to have achieved its goals of destroying Iran's nuclear sites and missiles, and Iran claiming to have forced the end of the war by penetrating Israeli defences with its retaliation.

"We have removed two immediate existential threats to us: the threat of nuclear annihilation and the threat of annihilation by 20,000 ballistic missiles," Israel's Prime Minister Benjamin Netanyahu said.

Iranian President Masoud Pezeshkian hailed a "great victory".

Iran's authorities moved swiftly to demonstrate their control after a war which had revealed that Israel had deep intelligence about the location of Iran's leaders, and apparently had agents operating across the country.

Iran executed three men on Wednesday convicted of collaborating with Israel's Mossad spy agency and smuggling equipment used in an assassination, the Iranian judiciary's Mizan news agency reported.

Iran had arrested 700 people accused of ties with Israel during the 12-day conflict, the state-affiliated Nournews reported on Wednesday.

During the war, both Netanyahu and Trump publicly suggested that it could end with the toppling of Iran's entire system of clerical rule if its leaders did not yield.

But after the ceasefire, Trump said he did not want to see "regime change" in Iran, which he said would bring chaos at a time when he wanted the situation to settle down.

Source: Reuters

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Adam

Economic

Central Bank

U.S. Federal Reserve Chair Jerome Powell resumes two days of Congressional testimony on Wednesday when he appears before the Senate Banking committee after scrutiny before a House panel the day before that focused on the Fed's concerns the Trump administration's tariff plans will raise inflation.

The Senate session begins at 10 a.m. with Powell expected to deliver the same message he presented to the House Financial Services Committee that even with recent inflation more moderate than expected, the central bank expects rising import taxes will lead to higher inflation beginning this summer. He is also expected to reiterate that the Fed won't be comfortable cutting interest rates until it sees if prices do begin to rise and whether that process shows signs of becoming more persistent.

"We should start to see this over the summer, in the June number and the July number...If we don't we are perfectly open to the idea that the pass-through (to consumers) will be less than we think, and if we do that will matter for policy," Powell said on Tuesday. “I think if it turns out that inflation pressures remain contained we will get to a place where we cut rates sooner than later...I do not want to point to a particular meeting. I don't think we need to be in any rush," particularly given a still-strong labor market and so much uncertainty about the impact of the still-unresolved tariff debate.

Tariffs have already risen on some goods, but there is a coming July 9 deadline for higher levies on a broad set of countries - with no certainty about whether the Trump administration will back down to a 10% baseline tariff that analysts are using as a minimum, or impose something more aggressive.

The Fed has held its benchmark interest rate steady in the 4.25% to 4.5% range since December, despite demands by President Donald Trump for immediate, and deep, rate cuts.

Economic projections released by the Fed last week showed policymakers at the median do anticipate reducing the benchmark overnight rate half a percentage point by the end of the year. But within those projections is a clear divide between officials who take the inflation risk more seriously -- 7 of 19 policy makers see no rate cuts at all this year -- and those who feel any tariff price shock will be less severe or quickly fade. Ten of the 19 see 2 or more rate reductions.

Investors currently expect the Fed to cut rates at its September and December meetings, but hold rates steady at its next meeting on July 29-30.