What’s behind Trump/Powell meeting?

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President Donald Trump invited Federal Reserve Board Chair Jerome Powell to meet at the White House with him and Treasury Secretary Steve Mnuchin on Monday, with few details released.

Trump tweeted, “Just finished a very good & cordial meeting at the White House with Jay Powell of the Federal Reserve. Everything was discussed including interest rates, negative interest, low inflation, easing, Dollar strength & its effect on manufacturing, trade with China, E.U. & others, etc.”

The Fed released a statement that the meeting covered “the economy, growth, employment and inflation.” The Fed said Powell’s remarks “were consistent” with those he made at last week’s congressional hearings. “He did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming information that bears on the outlook for the economy.”

Powell told the president that monetary policy decisions will be “based solely on careful, objective and non-political analysis,” the statement said.

“This is simply a case of Trump throwing everything at the Fed but the kitchen sink,” said Zach Abraham, principal/CIO at Bulwark Capital Management. “If we really want to keep China in check, the Fed and the White House must be on the same page. Beijing and the PBOC have strategically exploited Fed Independence and the inherent lag between monetary policy and economic reality on the ground. I'd assume Trump is merely trying to close this gap and make nice with Powell as he's realized the need to be on the same page. I just don't think the White House has realized that lower U.S. rates and a lower dollar are precisely what Beijing wants.”

Economic data
Builders remained confident about the market for new single-family homes, as the November National Association of Home Builders/Wells Fargo Housing Market Index dipped to 70 from 71 in October.

"We have seen substantial year-over-year improvement following the housing affordability crunch of late 2018, when the HMI stood at 60," according to NAHB Chief Economist Robert Dietz. "However, lot shortages remain a serious problem, particularly among custom builders. Builders also continue to grapple with other affordability headwinds, including a lack of labor and regulatory constraints."

Low mortgage rates and a strong labor market have helped the housing market.

The component of the index gauging current sales slid to 76 from 78, while traffic of prospective buyers dipped to 53 from 54 and sales expectations in the next six months crept to 77 from 76.

The New York area service sector “remained sluggish in November,” according to the Federal Reserve Bank of New York’s Business Leaders Survey. The current business conditions index rebounded to positive 2.9 from negative 4.3 in October, while the business climate index narrowed to negative 10.5 from negative 14.8, its third consecutive negative read, suggesting “firms regarded the business climate as worse than normal,” the Fed said.

The employment index was little changed, while the wages index fell to its lowest read in almost two years. The prices paid index dropped to its lowest rate in more than three years.

The future business activity rebounded to 12.9 from 2.2, still suggesting weakness. The index for future business climate narrowed to negative 14.0 from negative 22.8, “indicating that firms continued to expect the business climate to worsen in the months ahead."

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Monetary policy Housing Jerome Powell Donald Trump Federal Reserve Federal Reserve Bank of New York