Legal Pressure on the Fed Sparks Fears Over Central Bank Independence

But these legal actions by the administration are unprecedented in our 113 year history, and there are ongoing threats of additional such actions.

I, I worry that these attacks are battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policy without taking into consideration political facts.

For now, the Federal Reserve throwing in the towel on rate cuts this year.

Policymakers left rates unchanged, warning that developments in the Middle East are driving a high level of economic uncertainty, while the rate decision yesterday showing deep fractures of the central bank, with three Fed officials rejecting an easing bias and one governor.

Dissenting for a cut for now 2026 season wagers are abandoned and the chance of a rate hike being priced in for next year and that did send the tenure yield to a one month high while fresh GDP figures as well as PCE data hitting the tape right now as consumers grapple with record high gasoline prices.

Joining me.

This morning to weigh in is Danielle DiMartino Booth, CEO & Chief Strategist for QI Research.

Good morning, Danielle.

Thank you so much for joining me.

It's been quite the 24 hours and a lot for us to digest, but what did you make of Powell's swan song and are you surprised at what came out from the April Fed meeting?

Um, so, um, I was actually not surprised, uh, and I was hopeful that how will. would make the choice to stay on in 1948, his predecessor Mayor Echols, whose name happens to be on the Fed's building, made the same decision in order to indemnify the independence of the Fed.

Of course, Powell has some very personal reasons.

For staying on, um, but I don't blame him for not wanting to go into retirement without a full exoneration and no threat of a potential future criminal charge being handed down. and Danielle, while I have you here, I do want to get your take on this morning's economic data because we got PCE.

We saw Q1 GDP growth and of course we did get those jobless claims.

So I understand that you argue the Fed is failing its labor.

And you're paying attention to the underlying the data.

So tell us what you make of what's happening in the labor market and do you think the central bank is flying blind when it comes to employment right now.

Well, I think on two different levels they are because when we do get the revisions in that you just mentioned, BED, which by the way came out yesterday morning, the day that 3 officials said that they should have dropped the easing language, that data revealed that in the 2nd and 3rd quarters of 2025 that we actually lost jobs on a net basis.

I'm not talking about.

Average on average, we were losing 107,000 jobs in the second quarter, 57,000, excuse me, 53,000 jobs in the third quarter.

In other words, the Fed was not easing enough last year.

And when we see these very low jobless claims figures this morning that came out, lowest since 1969, you have to pay attention to the underlying data behind the claims.

If you look at continuing claimants, the number of Americans. who are unemployed, which is north of 7 million, only 1 in 4 are collecting unemployment benefits.

And on top of that, over the last 40 months, 40% of them have exhausted those benefits, so they no longer have them because each state only gives benefits for a certain number of weeks.

I think the incoming Fed Chair Kevin Warsh is going to have a much different take and try and modernize the way Fed officials analyze labor market data.

And Danielle, when it comes to the labor market, we will get a better read on the market when the jobs report comes out for the month of April.

But you are also paying attention to services disinflation.

So tell us why, especially when we're looking at rising energy costs.

Well, if something is rising, then something else will have to give in an environment when wage growth is all the way back to where it was in 2019 prior to the pandemic setting in.

There's only so much each household's budget can withstand, and that's why in the latest consumer price index print we saw food at home inflation flatline 0.0%, meaning.

Households are spending a lot more to fill up their gas tank, so they're actually spending less on groceries, and we're talking about essentials here.

When we're talking services inflation and you weave that into the mix, the discretionary spending picture on the services side continues to deteriorate.

We had fresh data from Conference Board this week that show that Americans' intentions to take vacations are at cycle.

Lows.

So these are the things that are telling us that you can only get so much out of a paycheck when you've got prices that are out of your control at the gas pump rising as quickly as they are.

That extra money has to come out of the budget somewhere else, and that's why we're paying such close attention to services disinflation, which is, which is accelerating to the downside. and Danielle, while I have you here, you have deep insight into the way that the Fed works.

The FOMC does remain deeply fractured, and 3 of the officials yesterday rejected an easing bias while one governor outright dissented for a cut.

So how does Kevin Warsh inherit the next upcoming regime over at the Federal Reserve and how does he build consensus?

You know, I think his greatest advocate in growing that consensus, given the language that Jay Powell used yesterday, is going to be Jay Powell himself.

He was extremely deferential to incoming chair Warsh, saying, I will step back and resume the position that I had 4 years as a governor so that Warsch can build the consensus that He needs so and Jay Powell's not going to lose his credibility among the other 18 members of the Federal Open Market Committee, but ironically I think it's going to be Powell himself that tries to dissipate the dissent that we saw yesterday and help Wsh build cohesion and consensus.

Well, a lot to keep our eyes on, Danielle, so I appreciate your time this morning.

As always, thank you so much for joining us and thank you so much for sharing your insights.

And thank you for having me.