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Chair Powell’s term as chair ends in May 2026, and the independence of the Fed is not specific to Chair Powell, but about the executive branch (and Supreme Court) views on an independent central bank.  Is the problem of political pressure on the Fed postponed or prevented?

Removing the extreme tariffs with China does not change the fact that tariffs at the current level (ex China) are still extreme.  Ten percent tariffs across the Board with 25 percent tariffs on autos, steel and aluminum result in the highest tariffs since the Great Depression.

Real GDP was -0.3, but final sales to domestic purchases was relatively stable, however it excludes gov spending, inventories, and net exports, all the categories that the new policies have most impacted. Government spending and net exports will likely continue to be weak.

This GDP report reflects how much the trade policies influenced behavior. Consumers and firms tried to front run the tariffs by stockpiling foreign produced goods. As a result this report highlights large inventory and imports. By moving purchases forward, less purhases later

In conjunction with the weak ADP (only 62,000) jobs created, the real GDP report reflects firms and individuals bracing for the trade and government spending shocks. The impact on the hard data are only likely to be clear this summer - todays data makes a recession more likely.

The weak data is a particularly poor time to attack the Fed. The weak data is already depressing the stock market, but the 10 year rate has risen, as it threatens the independence of the federal reserve and other institutions. Undermining institutions is economically costly.

Employment report was solid , 4.2 percent unemployment and payroll was 177k. Likely to see pass through of tariffs to some prices first and layoffs second. This makes it unlikely to see any change in monetary policy or forward guidance in the next two meetings.

Expect the first evidence in payrolls to be transportation and wharehousing - no china containers - less employment in sector - Grew 29k this report likely from a surge to front run the tariffs. Small business and retailers unable to resupply likely to be also impacted.

Expect delay in seeing layoffs until later this summer. Since initial impact will be supply shortages and price increases, which are difficult for Fed to react to - lower rates makes the problem worse. Lower rates are a solution to inadequate demand not a supply shortage.

CPI was moderate prior to the tariff announcement. The core CPI was 2.8 percent, unchanged from the previous month. While higher than what is consistent with a 2 percent target, it was better than be expected. However for monetary policy - post liberation day prices matter.

Administration wants higher deficit for tax cuts, lower rates, balanced trade. Unfortunately, large deficits need to be financed, either with higher interest rates using domestic saving or higher trade deficits to provide foreign financing. No immunity from economic rules.

The 20-year Treasury auction went poorly. The yield of 5.047 required significant purchases by primary dealers. It is also much higher than recent 20-year auctions. This is not something monetary policy can correct. More sustainable fiscal and trade policies are badly needed.

The progress on trade has gone quiet. The dramatic reduction on China tariffs for 90 days, and the outline of a UK trade agreement that few countries would find attractive, seems to have ground progress to close to a standstill with other countries. 90 days looks optimistic

Can tariffs significantly reverse the decline in manufacturing employment? Look at the graph. There has been a linear decline in the share of employment in manufacturing since WWII. High labor costs and high productivity means only high value added manufacturing are feasible

One of America's most competitive industries is higher ed. It helps to create a surplus in services attracting students globally. Some that stay in the US create top researchers for future US productivity. Threats on Harvard foreign students will undermine US competitiveness

ADP report was weak, only 37k jobs in May. Much slower than recent reports. If confirmed by employment report would be consistent with slower growth in second half of year. The largest declines were at small firms (-13k) who likely have the most difficulty responding to tariffs

The China tariff agreement unfortunately settles little. China has the leverage - rare earth minerals and magnets are controlled by China and can be slowed down or sped up in reaction to US policies. This should not be a surprise, China used this threat against Japan in 2010.

On net, it highlights that open hostility with China would be a disaster for US manufacturing of autos, military equipment, and Boeing. The trade war has only highlighted an uncomfortable dependence. The result, non-tariff barriers are rising not falling.

Prices in the economy are not like prices in financial markets. They do not move significantly with announcements. Price changes depend on sourcing, substitutability, supply lines, inventories, and margin pressures making timing less certain. Tariff effects takes time.

oil prices are up 10 percent over the last month as mid-east tensions rise. The US is moving out non-essential staff in Bagdad. A Israel/Iraq war would be very unfortunate. Another reason besides tariffs that inflation could be higher in the 2nd half, keeping Fed on hold.