A meeting of the minds between Powell and the president matters “at a very high level, because it affects perception,” said Christopher Whalen, head of Whalen Global Advisors. “There are investors who think that’s important, but I think the fundamentals underneath, particularly the credit markets, are what’s really driving things.”
Getting the president more acquainted with the nuance that can influence Fed decisions could help Powell’s position. The Fed’s own senior loan officer survey of banking executives released Monday showed slowing demand and tighter conditions for commercial and industrial loans.
Markets don’t expect any more rate increases this year, which was the case before the Powell-Trump meeting.
“I think it’s mostly just politics,” Whalen said. “I don’t think Powell or anybody else on the board of governors is going to react to a president or any other politician’s comments on monetary policy.”
Though this was the first for Powell and Trump, meetings between presidents and Fed chairs are nothing new.
Former President Barack Obama and then-Fed Chair Janet Yellen met on multiple occasions, with one in April 2016 gathering some attention because of a perception that Obama was worried about rate increases that slow down the economy and tarnish his legacy. After that meeting, both sides said the economy was discussed but there was nothing on rate policy.
Trump’s criticism of Powell stood out because of its very public nature. The president used his favorite megaphone, Twitter, to chastise the central bank, and White House leaks indicated that Trump was contemplating replacing Powell if the Fed kept moving rates higher.
Stocks were higher Monday in the wake of the meeting, with David Rosenberg, chief economist and strategist, noting that “anything to give Mr. Market a sense that the Fed will remain on this freshly paved dovish course” helps spark confidence.