{"id":24363,"date":"2025-06-24T07:30:00","date_gmt":"2025-06-24T11:30:00","guid":{"rendered":"https:\/\/jeffclarktrader.com\/market-minute\/?p=24363"},"modified":"2025-08-22T08:59:23","modified_gmt":"2025-08-22T12:59:23","slug":"fed-chairman-powell-is-handcuffed","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/fed-chairman-powell-is-handcuffed\/","title":{"rendered":"Fed Chairman Powell Is Handcuffed\u2026"},"content":{"rendered":"

Jerome Powell will not lower interest rates.<\/p>\n

It\u2019s not because the Fed Chairman is a numbskull, or a dumb guy, or a total and complete moron \u2013 as President Trump has alleged.<\/p>\n

It\u2019s because Mr. Powell is handcuffed.<\/p>\n

By lowering short-term interest rates, the Fed will push long-term rates higher. And, that\u2019s something the U.S. can\u2019t afford to have happen right now.<\/p>\n

Let me explain\u2026<\/p>\n

The Fed sets the target for the Fed Funds rate \u2013 the rate of interest banks charge each other on overnight loans. The current target rate is 4.25-4.50%. President Trump would like to see it somewhere closer to 2%.<\/p>\n

The problem is, the Fed can\u2019t simply decree a 2% Fed Funds rate and have it magically happen. In order to change the rate, the Fed has to engage in open market operations.<\/p>\n

In other words, the Fed needs to go into the open market and either buy or sell short-term debt in order to reach its target rate. If the Fed wants to lower rates, it has to buy enough short-term debt to push the price higher so that the yield comes down.<\/p>\n

In the days of Quantitative Easing (QE), this was easy. The Treasury would print money, give it to the Fed, and the Fed would buy Treasury bills. The price of the bills would go up. The yield would come down. The Fed would hit its target.<\/p>\n

But, printing money causes inflation. The Fed doesn\u2019t want that anymore. So, we stopped the whole QE fiasco in 2022 (after 14 years of it!!!).<\/p>\n

So, where does the Fed get the cash to buy the Treasury bills now? It has to sell other securities in its portfolio \u2013 specifically, longer-term bonds. And, by selling bonds, the Fed pushes the price of those bonds down which forces the yield higher.<\/p>\n

In other words, by lowering short-term rates, the Fed causes long-term rates to rise.<\/p>\n

For proof, we only need to look at what has happened to the yield on the 30-year Treasury bond since the Fed started lowering its Fed Funds rate last September\u2026<\/p>\n\n\n

\"\"<\/figure>\n\n\n

Last September, the Fed lowered its Fed Funds target rate by 0.50%. The Fed cut rates by another 0.50% by the end of 2024 \u2013 lowering the Fed Funds target by a total of 1%.<\/p>\n

But long-term rates went up. The yield on the 30-year Treasury Bond was less than 4% in September. It hit nearly 5% by January.<\/p>\n

In the absence of Quantitative Easing (QE), lowering short-term rates causes long-term rates to rise. The US cannot afford that to happen right now because\u2026<\/p>\n

\u2026The national debt just surpassed $37 trillion. Twenty-five percent of that debt comes due in the next few months. It has to be refinanced.<\/p>\n

So, the government has to issue $9 trillion in long-term debt just to pay off the debt that is maturing over the next few months.<\/p>\n

You can see the problem here. If the Fed lowers short-term rates, the cost of refinancing long-term debt will be higher.<\/p>\n

Chairman Powell knows this. There is no way he\u2019ll be lowering rates until this glut of refinancing is out of the way.<\/p>\n

President Trump knows this, too. But, by publicly chastising the Fed Chairman, he can divert attention away from a potential debt crisis.<\/p>\n

And, he\u2019s created a handy scapegoat just in case things go south.<\/p>\n

Best regards and good trading,<\/p>\n

\"Signature\"<\/p>\n

Jeff Clark
Editor, Market Minute<\/em><\/p>\n

\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff\u2019s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just go here<\/a> to check it out.<\/p>\n<\/div>\n\n\n

\"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

There is a glut of debt refinancing coming due\u2026 and there\u2019s no way Mr. Powell can lower rates until it\u2019s out of the way.<\/p>\n","protected":false},"author":100,"featured_media":0,"comment_status":"closed","ping_status":"0","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[],"person":[],"newsletter-type":[],"ticker":[],"class_list":["post-24363","post","type-post","status-publish","format-standard","hentry","category-market-minute"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/24363","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/100"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=24363"}],"version-history":[{"count":3,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/24363\/revisions"}],"predecessor-version":[{"id":25085,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/24363\/revisions\/25085"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=24363"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=24363"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=24363"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=24363"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=24363"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=24363"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=24363"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}