Is Trump playing the YCC game, targeting Powell and tariffs?

·         Under Trump 2.0, USD slid ~11% in the first six months, positive for export-heavy US MNCs, but US10Y bond yield remains around 4.3%

·         Despite Trump’s ongoing insult, Fed Chair Powell is surprisingly cool; is there a tacit understanding?

·         US Treasury Secretary Bessent is now urging the Fed to cut 50 bps in September (after the expected July hold) 

US President Trump is now desperately commenting against Fed Chair Powell almost every other day for not cutting rates by at least 100 bps in H1CY25. Trump is now insulting Powell much more than his 1^st term in a deliberate pattern, talking about shadow Fed Chair in a desperate attempt to keep US short-term (5Y/10Y) bond yields lower as the US has to roll over almost $9T of treasury debt later this year (H2CY25). This may be the main reason apart from a potential stagflation-like scenario in the US late 2025 and 2026 because of Trump’s bellicose policies, from tariffs to immigration, which can affect both price stability and employment.

Powell, on the other side, is maintaining that if there were no big Trump tariff issues, the Fed would have started the rate-cutting (normalization) process from Q1CY25 itself in an orderly manner.  Powell and even most other FOMS policy makers are stressing that the Fed has to raise rates to manage potentially high Trumpflation, but the Fed will not raise rates as such tariff inflation may be transitory. But at the same time, the Fed is not sure about the actual rate of tariffs on the US merchandise imports (~3T/Year) and their effect on the overall consumer spending and private capex. Thus Fed is now in wait & watch mode; not in a position to cut or hike. Powell has made it clear that the Fed works on the data outlook, not actual data.

Fed already frontloaded at least 50 bps of additional rate cuts. Fed cuts 50 bps in September’24 quite unexpectedly, as by then the probability of Trump 2.0 suddenly surged (after two ‘assassination’ attempts on Trump during his election campaign). By October, it was almost clear that Trump was coming back to the White House after a spirited debate performance against Kamala Harris. Thus Fed has already cut at least 50 bps in advance, anticipating Trump trade war 2.0. And all other major global banks also did the same, led by the ECB.

Trump’s comments and rhetoric toward Powell

Trump has repeatedly criticized Powell for not lowering interest rates enough, often arguing that high rates hurt economic growth and increase borrowing costs for the government.  In April 2025, Trump called Powell a “major loser” and demanded immediate rate cuts, claiming there was “virtually no inflation.” In May 2025, Trump met with Powell at the White House, reportedly telling him it was a “mistake” not to lower rates. In June and July 2025, Trump escalated his attacks, including a handwritten note accusing Powell of costing the U.S. “a fortune” by keeping rates high and suggesting rates should be as low as 1%.

In the Fox News *Sunday Morning Futures* interview with his favorite TV anchor, Maria Bartiromo on June 29, 2025, President Trump intensified his criticism of Federal Reserve (Fed) Chair Powell, focusing on Powell’s refusal to lower interest rates. Trump called Powell a “bad person” and signaled his intent to replace him with someone more aligned with the White House’s push for lower rates, stating, “We’re going to get somebody into the Fed who’s going to be able to lower [interest rates].” He discussed the challenge of refinancing $9 trillion in U.S. debt, arguing that high interest rates under Powell’s leadership were costing taxpayers “hundreds of billions of dollars.” Trump’s remarks were part of a broader pressure campaign, as he reiterated his frustration with Powell’s monetary policy, which he claimed was stifling economic growth.

Highlights of Trump’s anti-Fed/Powell comments in his Fox interview: June 29

·         We have a stupid individual at the Federal Reserve

·         Don't want to pay for a 10-year debt at a higher rate

·         We should be at a 1% or 2% interest rate

On July 1, 2025, Trump posted on his Truth:

·         Jerome “Too Late” Powell and his entire Board should be ashamed of themselves for allowing this to happen to the United States. They have one of the easiest, yet most prestigious, jobs in America, and they have FAILED — And continue to do so. If they were doing their job properly, our Country would be saving Trillions of Dollars in Interest costs. The Board just sits there and watches, so they are equally to blame. We should be paying 1% Interest, or better!

Trump also targeted Powell for reckless spending of Federal funds

In his recent Congressional Testimony, Powell was grilled by some Republicans about alleged ‘lavish’ Fed office decoration (renovation), wasting taxpayers’ money, especially at a time when the Fed is running at a big notional loss (MTM).  A Bloomberg article on July 2, 2025, reports that Federal Housing Finance Agency (FHFA) Director Bill Pulte called for a congressional investigation into Federal Reserve Chair Jerome Powell, accusing him of political bias and deceptive testimony during a Senate Banking Committee hearing.

Pulte’s statement, posted on X, claimed Powell’s remarks about a $2.5 billion renovation of the Fed’s Washington, D.C., headquarters were misleading, citing Senator Cynthia Lummis’s critique of Powell’s denial of lavish upgrades like a private dining room, special elevators, and water features. Pulte argued these inaccuracies, combined with alleged bias in maintaining high interest rates (4.25–4.5%), warranted Powell’s removal “for cause.” President Trump amplified this on Truth Social, calling Powell “Too Late” and demanding his immediate resignation, echoing his June 29, 2025, Fox News comments criticizing Powell’s rate policy.

On July 3, Trump echoed Pulte about Powell, sharing the link to the BBG article:

·         “Too Late” should resign immediately!!!

·         “Fed Chair Should Be Investigated by Congress, FHFA Head Says”

Pulte’s call focuses on Powell’s June 24–25, 2025, Senate testimony, where he dismissed reports of extravagant Fed renovations as “misleading.” Pulte, citing Lummis, claims Powell lied, pointing to 2021 Fed planning documents that allegedly contradict his statements.

Political Pressure: This aligns with Trump’s ongoing feud with Powell, whom he appointed in 2017 after a long interview drama involving several potential candidates, including even Yellen. Now, Trump is expressing his ‘mistake’ for his decision to appoint Powell, followed by his reappointment by Biden. Pulte, a Trump ally, has been vocal on X, accusing Powell of harming the housing market by keeping rates high amid tariff-driven inflation concerns. House Judiciary Committee Chair Jim Jordan indicated lawmakers would “look at” the issue but hadn’t discussed a specific investigation. A recent Supreme Court ruling shields the Fed from direct presidential ousting, limiting Trump’s ability to fire Powell before his term ends in May 2026.

Treasury Secretary Scott Bessent

On July 3, 2025, during an interview on Fox Business’s *Mornings with Maria*, Bessent addressed speculation about Powell’s future, avoiding direct calls for resignation but implying Powell’s spending oversight at the Fed was inadequate. He stated that the administration was focused on eliminating “waste, fraud, and abuse” and suggested it was “healthy” for the Fed to control spending, aligning with Trump’s broader fiscal tightening agenda. Bessent also sidestepped questions about his interest in replacing Powell, saying he would go “where the president thinks I am best suited” but emphasizing that the administration had “a lot of great candidates” for the Fed chair role.

Bessent suggested Powell’s oversight of spending at the Fed (e.g., the $2.5 billion Fed headquarters renovation) was inadequate. Bessent had previously floated the idea of appointing Powell’s successor to a Federal Reserve Board vacancy in January 2026, potentially elevating them to chair when Powell’s term ends in May 2026. He told Bloomberg TV that the administration was already considering candidates, signaling a proactive push to replace Powell (Shadow Fed Chair).

In a Bloomberg TV interview on June 30, Bessent discussed Fed policy and the process of replacing Powell, whose term as Fed Chair ends in May 2026. He criticized the Fed’s hesitancy on interest rate cuts, stating, “They seem a little frozen at the wheel here,” referencing their slow response to inflation in 2022 and suggesting a similar caution in 2025 despite market signals for rate cuts. He argued that inflation from Trump’s tariffs would be transitory, countering Powell’s concerns about tariff-driven price increases. Bessent also outlined plans to work on Powell’s successor in the coming weeks and months, mentioning potential candidates already at the Fed, such as Governors Christopher Waller and Michelle Bowman.

Highlights of comments by US Treasury Secretary Bessent: July 3

·         Bessent was asked if he agrees with Trump's call for 3%-pt Fed cuts. Declines a specific answer

·         The market is signaling Fed rate cuts.

·         As per Fed’s model, Fed should have cut rate multiple times by now; failure to do so may result in a drastic one-time rate cut in September’25

·         If the Fed doesn't cut here, maybe the September cut will be bigger

·         We are at very high real interest rates here

·         We're going to see things take off by Labor Day in September

·         Bessent signals that Trump-appointed Fed members have a different take

·         There are lots of good candidates for Fed chair. We will start working on that in the Fall

·         We expect to see about 100 nations get a minimum 10% reciprocal tariff

·         We're going to be announcing several trade deals

·         I expect a flurry of trade deals before July 9^th

·         China's currency is non-convertible and thus not comparable to USD for a potential replacement of USD AS global reserve currency

·         If the euro hits $1.20, Europeans will be squawking as an export-heavy economy

·         The demise of the dollar was predicted many times in the past

·         It's very difficult to predict debt 10 years out

·         I'm confident going in the right direction on debt post-tax

·         The dollar's price has nothing to do with strong-dollar policy; the USD price is subject to market volatility

·         I expect stablecoin legislation will increase demand for US Treasuries

·         $2 trillion in possible stablecoin US Treasuries demand

·         Debt-to-GDP is expected to be well into the 90% range by the end of Trump's term

·         We will use T-bills to refill the Treasury cash account

·         We will see US banks take up more of the debt issuance

·         There could be an increase in US financing needs based on yields

·         I do expect to accomplish the 3-3-3 plan by the end of Trump's term (3% real GDP growth, 3% fiscal deficit, and an increase of US oil production by 3 mbpd)

·         Markets signal the tax bill is fiscally prudent and pro-growth

·         The markets are telling us they like the tax bill

·         There are lots of good candidates for the Fed chair. We will start working on that in the Fall.

·         China is shortening rare earth export approvals for European companies

·         Trump will determine if nations are talking in good faith.

·         Bessent on Jobs data: Any one month can be noisy. Overall trend is good

·         Overall, the jobs report was a good number

·         Looming election in Japan may be constraining talks

·         Japan is in a tough spot now, with the upper House election

·         US Trade Representative Greer will be working over the weekend with the EU

·         We'll see what we can do with the EU

·         I met with my EU trade counterpart this morning

·         Nations should be careful. Their rate could boomerang back to the April 2^nd  rate.

·         Retail margins rose in COVID. There may be some normalization

·         We are going to see more trade deals

·         Tariffs could lead to a one-time price bump

·         There is a significant risk that upward pressure on prices will be around for some time

·         20% is the reciprocal rate for Vietnam

·         Vietnam's 20% tariff doesn't stack on top of 10%

·         I understand the Vietnam trade deal has been finalized in principle

·         What we've seen so far is that tariffs haven't hurt

·         I'm going to stick with the market's take, not economists

·         Trump is the best President in the US so far in terms of economic knowledge

Trump’s Politicization of the Fed is undermining the credibility of USD/UST

Bessent is accusing Powell and the Fed of “tariff derangement syndrome,” claiming their refusal to cut rates was overly influenced by fears of tariff-driven inflation. He noted that the Fed cut rates by 50 basis points in September 2024 when inflation was higher, suggesting inconsistency in Powell’s current stance and trying to help Democrats. Bessent’s comments reflect a strategic push to prepare for Powell’s exit, with discussions about appointing a “shadow chair” as early as January 2026 for a 14-year Fed Board seat, potentially transitioning to Chair in May 2026. This suggests an attempt to pressure Powell indirectly rather than an outright demand for resignation, though it aligns with Trump’s aggressive rhetoric.

Bessent’s critique of Powell’s “frozen” policy reflects frustration with the Fed’s data-driven approach, which prioritizes inflation control amid tariff uncertainties. Powell’s caution stems from the 2021–2022 inflation surge, making the Fed wary of easing under political pressure, which could undermine its credibility. Bessent’s comments, alongside those from other Trump admin officials like Karoline Leavitt and FHFA Director Bill Pulte, suggest a coordinated effort to scapegoat Powell for economic challenges, such as high borrowing costs or tariff-related market and economic volatility. However, Bessent’s earlier warnings (April 2025) about the risks of firing Powell—market instability and higher yields—indicate he’s balancing Trump’s aggression with a more measured approach to avoid financial disruption.

Conclusions

Overall, Trump may be trying to keep the USS and US bond yields lower by intentionally attacking Fed Chair Powell, coupled with his bellicose tariff and economic policies (Big & Beautiful Bill-Budget plan). Trump needs lower borrowing costs to fund his deficit spending and also lower USD to make US exports competitive. The US dollar index slid almost 11% in H1CY25 under Trump 2.0, unprecedented in recent times. A lower USD is positive for export-heavy US MNCs.

But the US10Y bond yield is hovering around 4.30% on average as it’s related to US average core/PCE inflation, inflation expectations, Fed stance (monetary policy), and also fiscal policy. Prices of bonds in the secondary market depend on supply and demand; as the market is aware of a potentially higher supply of US bonds in the coming months to refinance existing $9T public debt, the price of 10Y UST may not fall drastically even if the market is now discounting Fed rate cuts from September’25. Overall, USD is now near the technical demand zone (positional support), while 19Y UST is around the supply (positional resistance) zone.

Similarly, USDJPY and USDCAD are now near the short-term support (demand) zone, while GBPUSD and EURUSD are near the resistance (supply) zone. Looking ahead, USD, US bond yield may surge, while equities, and USTs, may slump after Trump signs BBB and higher reciprocal tariff letters to at least 10-15 major trading partners (out of 18), including China. Trump may extend his tariff pause till at least December’25 to save the US economy from uncertainty, a potential supply shock, and stagflation. But in that scenario, overall uncertainty remains.

Technical outlook: DJ-30, NQ-100, SPX-500 and Gold

Looking ahead, whatever may be the narrative, technically Dow Future (CMP: 44800) now has to sustain over 45000 for a further rally towards 45300/45800* and only sustaining above 45800, may further rally to 46100/46500-47100/47200 in the coming days; otherwise sustaining below 44950, DJ-30 may again fall to 44200/43900-43400/42400 and 41700/41200-40700/39900 in the coming days.

Similarly, NQ-100 Future (23000) now has to sustain over 23100 for a further rally to 23200/23600-23800/24000 and 24100/24450-24700/25000 in the coming days; otherwise, sustaining below 22900, NQ-100 may again fall to 2400/22200-21900/20900-20700/20200 and 19890/18300-17400/16400in the coming days.

Looking ahead, whatever may be the fundamental narrative, technically SPX-500 (CMP: 6275) now has to sustain over 6400-6450 for a further rally to 6525/7000-7500/8300 in the coming days; otherwise, sustaining below 6350/6300-6250/6200, SPX-500may again fall to 6000/5800-5600/5300 in the coming days.

Technically Gold (CMP: 3350) has to sustain over 3375-3395 for a further rally to 3405/3425*-3450/3505*, and even 3525/3555 in the coming days; otherwise sustaining below 3365-3360, Gold may again fall to 3340/3320-3300*/3280 and 3255/3225-3200/3165* and further to 3130/3115*-3075/3015-2990/2975-2960*/2900* and 2800/2750 in the coming days.