
Trump's big fiscal dominance play
Editor's note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day's biggest stories. Act on the news with POLITICO Pro.
Quick Fix
President Donald Trump wants Federal Reserve Chair Jerome Powell to consider the cost of the government's ballooning debt service payments when the central bank meets later this month. It's an enduring theme in his ongoing effort to pressure the Fed chair to lower interest rates.
Powell 'is truly one of my worst appointments,' Trump posted on his social network, Truth Social, on Friday. 'We deserve to be at 1% [interest rates], saving One Trillion Dollars a year on Interest Costs.'
Here's why that matters: The Fed's primary responsibilities are to keep prices stable and promote maximum employment. When central banks prioritize government borrowing needs over their core mission — economists call this 'fiscal dominance' — it often leads to cascading inflation.
If bond investors and consumers assume that central banks lack the ability or political will to contain higher prices from stimulative federal spending, inflation expectations climb. The economic and political fallout can be massive; the subordination of monetary policymaking to accommodate fiscal expansion was a hallmark of recent out-of-control price surges in Argentina and Turkey, and it contributed to the collapse of the Weimar Republic in Germany.
So what? While he isn't using the phrase, Trump is making arguments in favor of a form of fiscal dominance. And while there are structural and technical safeguards in place to prevent such an outcome, they are not impenetrable.
The Treasury-Fed Accord of 1951 — struck amid rocketing inflation after a nine-year period when the central bank had agreed to keep rates low to help the government finance World War II and its aftermath — formalized the central bank's independence from Treasury with regard to setting borrowing costs. But as former Philadelphia Fed President Charles Plosser has noted, that accord is 'an institutional arrangement, not a legal agreement.'
And while the Federal Reserve Act is specific when it comes to the central bank's monetary policy objectives, fiscal considerations invariably factor into how central bankers consider the overall health of the economy. And deficits are expected to climb over the next decade as Trump's 'big, beautiful bill' takes effect.
'It would be very difficult to follow the direction in the Federal Reserve Act — to promote low inflation and full employment — if the Federal Reserve were pursuing a mandate of keeping debt service costs low,' said Lael Brainard, a former Fed vice chair and top economic adviser to President Joe Biden. Still: 'It's not an explicit prohibition, per se, but the dual-mandate responsibilities of the Federal Reserve are explicit.'
Another factor to consider: There's an argument emanating from Trump's orbit that the Fed and Treasury need to work hand-in-glove to manage the central bank's balance sheet — the Fed has been a major purchaser of government securities on the open market during periods of stress. That would invariably give the administration more say in decisions that affect interest rates.
Kevin Warsh, the former Fed governor who's now a contender to succeed Powell, recently floated the prospect of a new Treasury-Fed accord that would allow the Treasury secretary and central bank chief to 'describe to markets plainly and with deliberation, 'This is our objective for the size of the Fed's balance sheet.''
As Warsh described it, since the Fed's holdings of government securities have a bearing on both fiscal and monetary policy, such an accord wouldn't breach the central bank's independence.
Nevertheless, the prospect of a new Treasury-Fed accord would invariably raise questions about Trump's influence over policies that ultimately affect rates. And few expect markets to respond favorably if the president's pressure campaign ultimately undermines faith in the central bank's ability to stick to its mandate as deficits continue to climb.
As Brainard told me, 'At the end of the day, it's investors who decide how much they need to be compensated to hold longer-term Treasury securities and longer-term debt more generally. If their view is that inflation is going to be high — and that the Federal Reserve's ability to control inflation has been undermined — they'll simply demand more compensation.'
It's Monday — And it's another very busy week on the Hill. As always, send MM tips and pitches to me at ssutton@politico.com.
Driving the Week
Monday … The House Appropriations Financial Services and General Government Subcommittee holds a markup of the FY2026 Financial Services and General Government bill at 5:30 p.m. … The Senate Agriculture Committee holds a markup to vote on Brian Quintenz's nomination to be chairman and a commissioner of the Commodity Futures Trading Commission, along with other nominations …
Tuesday … Powell and Fed Vice Chair for Supervision Michelle Bowman speak at the Integrated Review of the Capital Framework for Large Banks Conference, which kicks off at 8:30 a.m. … World Bank President Ajay Banga speaks at the Center for Global Development's conference on development economies at 9:10 a.m. … Senate Finance Committee meets at 9:45 a.m. to mark up the nominations of Joseph Barloon to be a deputy U.S. Trade Representative in the Geneva Office and Brian Morrissey Jr. to be general counsel at Treasury … The Securities and Exchange Commission holds a meeting of the Small Business Capital Formation Advisory Committee at 10 a.m. … Senate Finance holds a hearing on the nominations of Jonathan McKernan to be Treasury undersecretary and Alex Adams to be assistant Health and Human Services secretary for family support …
Wednesday … House Financial Services has a second markup hearing scheduled for 10 a.m. … Senate Banking holds a markup to vote on the nominations of Ben DeMarzo to be assistant HUD secretary; Craig Trainor to be assistant HUD secretary; Jovan Jovanovic to be chairman of the Export-Import Bank; Francis Brooke to be assistant Treasury secretary; and David Peters to be assistant Commerce secretary at 10:30 a.m. …
Thursday … New home sales data for June is out at 10 a.m. …. House Financial Services ranking member Maxine Waters (D-Calif.) speaks at a Brookings Institution event at 11:30 a.m. …
Friday … The House Ways and Means Committee holds a field hearing on 'The One, Big, Beautiful Bill Delivering for American Economy' at 1 p.m. in Las Vegas
In his ear — The WSJ's Brian Schwartz and Nick Timiraos reported over the weekend that Treasury Secretary Scott Bessent has been making the case to Trump that he should not try to fire Powell, citing political and legal obstacles as well as the turmoil that action could unleash in markets.
— Trump, who's suing the Journal over its report on a birthday missive he allegedly wrote to disgraced financier Jeffrey Epstein, was not happy with the article. 'Nobody had to explain that to me,' he posted on Truth Social on Sunday. 'I know better than anybody what's good for the Market, and what's good for the U.S.A. If it weren't for me, the Market wouldn't be at Record Highs right now, it probably would have CRASHED! So, get your information CORRECT. People don't explain to me, I explain to them!'
First in MM: Warren hammers Pulte — Federal Housing Finance Agency Director Bill Pulte has been one of Trump's biggest attack dogs with regard to Powell and has been pushing for the Fed chair's ouster for weeks. The FHFA chief's unusual social media presence — he's repeatedly suggested that Powell will resign — led Massachusetts Sen. Elizabeth Warren on Sunday to send a letter demanding more information about his X usage, his focus on Powell and his work at the housing agency. [Link: https://cms.politico.com/cms/content/edit.jsp?typeId=0000014b-7431-dd1d-a1db-77bd78f20000&id=00000198-29f7-db71-ab99-7ffff1b80000 ]
'Your prolific activity on X and apparent decision to take time away from your duties as FHFA Director to draft a letter for President Trump to fire Chair Powell are abnormal,' Warren, the top Democrat on Senate Banking, wrote to Pulte. 'Your behavior raises significant questions about your judgment and commitment to operating FHFA in a responsible, competent, and lawful manner.'
The FHFA did not respond to a request for comment.
In the books— Trump on Friday signed the first major congressional overhaul of cryptocurrency rules into law, Jasper Goodman reports. The GENIUS Act creates bespoke rules for dollar-pegged stablecoins.
— And as Declan Harty writes, the new law 'could clear the way for Americans to view crypto as not just a speculative investment but as a lightning-fast way to conduct transactions by circumventing traditional financial players like credit-card intermediaries.'
At the regulators
Warning — Outgoing Public Company Accounting Oversight Board Chair Erica Williams told Declan that the SEC's shakeup of the industry watchdog is coming as market volatility and a tight economy necessitate strict oversight of companies' audits. 'History tells us what happens when the economy is tight: People cook the books,' she said.
Banks v. crypto — The banking lobby is urging the Office of the Comptroller of the Currency to hold off on applications by multiple crypto firms seeking national charters, Victoria Guida reports.
In The Economy
The grocery economy — The GOP megabill's cuts to the Supplemental Nutrition Assistance Program are poised to devastate independent grocery stores that are concentrated in Trump-friendly low-income communities, Rachel Shin reports.
Dissent incoming? — In an interview with Bloomberg TV on Friday, Fed Gov. Christopher Waller hinted that he might dissent if his fellow central bank policymakers move to hold rates steady when they meet next week. Waller has argued that a slowdown in private sector hiring necessitates a cut.
What a pisser — Per The Washington Post's David Lynch: 'The tariffs imposed to date also have had some presumably unintended effects. The U.S., for example, is now more dependent upon Russia for urea, a common fertilizer used to grow crops such as wheat, corn and rice.'
Wall Street
What's the bet? — The possibility that Trump may attempt to fire Powell has created a new trade for Wall Street investors. Here's a big one, per Bloomberg's Ye Xie: 'Buy two-year Treasuries and sell US 10-year notes.'
'Woke' political risk — Trump threatened to block a deal that would allow the NFL's Washington Commanders to build a new stadium in DC 'if they don't change the name back to the original 'Washington Redskins,'' POLITICO's Cheyanne Daniels reports. The team's owner Josh Harris — a co-founder of the private credit behemoth Apollo Global Management — said in February that the team wouldn't be changing its name anytime soon.
'Anti-woke' political risk — The NYT's Mike Isaac and Ryan Mac have a story about how the Silicon Valley venture powerhouse Sequoia Capital is facing blowback from partner Shaun Maguire's ultra-MAGA social media presence. Maguire's recent X post claiming that New York City mayoral candidate Zohran Mamdani is lying to advance 'his Islamist agenda' has been blasted by tech industry participants for being Islamophobic.
Jobs report
Wharton professor Christina Parajon Skinner, a former legal counsel at the Bank of England, has joined Treasury as a deputy assistant secretary for the Financial Stability Oversight Council, according to her LinkedIn.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
15 minutes ago
- Yahoo
Trump Approval Rating 46%: Less Than Half The Country Approves Of President's Handling Of Economy, Cryptocurrency
President Donald Trump's approval rating continues to trend below 50% with voters unsure about several key items such as tariffs, the economy and the recent passage of the One Big Beautiful Bill. Here's a look at where voters stand on certain key issues. What Happened: The recent passage of the One Big Beautiful Bill and ongoing negotiations with countries over tariffs has voters reconsidering whether they approve of the current president's first six months in office. A new Emerson College poll shows Trump with a 46% approval rating and 47% disapproval rating for his first six months in office. The approval rating was up one percentage point from June with the disapproval rating also up one percentage point from June. Trending: Be part of the breakthrough that could replace plastic as we know it— Trump's approval rating rose slightly from June, marking the first increase after seeing the president's approval rating go from 49% in January to 48% in February and March, to 45% in April and June. "About six months into the second Trump administration, the president's approval rating has stabilized in the mid-40s, while his disapproval has steadily increased about a point each month since the inauguration and now stands at 47%," Emerson College Polling Executive Director Spencer Kimball said. Among voters, Trump's approval rating was highest among the demographics of men (53%), white voters (52%) and voters over 70 (53%). Trump's approval rating was lowest among independent voters (38%), women (40%), Hispanics (38%) and Black voters (25%). By category, Trump scored a 51% disapproval rating on his handling of the economy, with a 41% approval rating. While Trump's approval rating was up from 37% in the 100-day poll for handling the economy, his disapproval rating was also up two percentage points. Voters also showed only a 25% approval for Trump's handling of cryptocurrency, with a 39% disapproval rating. Both figures were up four percentage points from a previous poll. On tariffs, 50% of voters said they disapproved of Trump's handling, while 36% said they It's Important: The latest poll shows that Trump scores below average marks for the handling of the economy and cryptocurrency, which might be impacting his overall approval rating. The One Big Beautiful Bill Act could also be weighing on the overall approval rating for Trump. Thirty-nine percent of voters said they think the One Big Beautiful Bill will have a negative impact on their lives, compared to 33% who think it will have a positive effect. Nine percent said they think it will have no impact on their life. The economy is the top issue for voters at 31% of the vote, outranking democracy (23%), immigration (15%) and health care (9%). The latest poll comes with Trump recently praising "crypto week" as members of Congress took up several bills to advance the sector. The price of Bitcoin (CRYPTO: BTC) has hit several all-time highs since Trump won the 2024 election and took office. The low approval rating for his handling of cryptocurrency could be related to the lack of an official Bitcoin purchase for the strategic reserve he promised earlier this year. Crypto investors also want more regulation passed and more support from the U.S. government on items like no taxes on capital gains. Trump's latest approval ratings came shortly before the S&P 500, which is tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), hit new all-time highs on Monday. The poll serves as a reminder that even with the stock market and Bitcoin at all-time highs, many voters are unhappy with the way Trump is handling the economy and cryptocurrency sector, as there could be trouble ahead. Read Next: $100k+ in investable assets? Match with a fiduciary advisor for free to learn how you can maximize your retirement and save on taxes – no cost, no obligation. Jeff Bezos-Backed Arrived Homes Hits A Big Sale On Charlotte Property – Investors Earning A 34.7% Return Photo: Joey Sussman from Shutterstock Up Next: Transform your trading with Benzinga Edge's one-of-a-kind market trade ideas and tools. Click now to access unique insights that can set you ahead in today's competitive market. Get the latest stock analysis from Benzinga? This article Trump Approval Rating 46%: Less Than Half The Country Approves Of President's Handling Of Economy, Cryptocurrency originally appeared on Sign in to access your portfolio
Yahoo
15 minutes ago
- Yahoo
Stock market today: Dow, S&P 500, Nasdaq futures push up as Wall Street awaits Fed decision, Big Tech results
US stock futures traded flat as investors braced for the Federal Reserve's next interest rate decision and earnings from tech giants Microsoft (MSFT) and Meta (META). Futures attached to the Dow Jones Industrial Average (YM=F) and the benchmark S&P 500 (ES=F) ticked up 0.1%. Futures attached to the tech-heavy Nasdaq 100 (NQ=F) rose 0.2%. Read more: The latest on Trump's tariffs Stocks fell on Tuesday, leading the S&P 500 to snap its six-day record streak. US-China trade talks wrapped up without an extension of the tariff pause currently in place between the two countries, but Treasury Secretary Scott Bessent said President Trump would make a "final call" on the matter soon. Job openings, meanwhile, slid, raising the stakes for the July jobs report, which arrives Friday. Starbucks stock popped in after-hours trading after the company's earnings showed US sales fell less than feared. During day trading, Boeing (BA), Spotify (SPOT), Merck (MRK), and UnitedHealth (UNH) also reported earnings, with only Boeing seeing a stock jump following its results. The Fed kicked off its two-day policy meeting Tuesday and will report its decision on interest rates Wednesday at 2 p.m. ET. With the central bank is expected to hold rates steady, Wall Street will be closely watching the Fed's "dot plot" and remarks from Fed Chair Jerome Powell for signals on potential rate cuts later this year. Also on Wednesday, after the bell, Big Tech stalwarts Microsoft and Meta are set to report earnings. Both companies are contending with growing scrutiny over whether their eye-popping AI investments are paying off. Looking forward to Thursday, Apple (AAPL) and Amazon (AMZN) will report their results. Wall Street will also get another clue as to the possible direction of interest rates with the release of the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) index. Finally, Trump's deadline for trade partners to strike deals with the US or else face blanket tariff rates looms over markets this week, with the cutoff set for Friday. Oil prices hold after Trump-Russia row Oil prices held gains overnight Tuesday after jumping 3% Monday, with supply issues in focus. Trump's continued pressure on Russia over the Ukraine war has raised concerns over how economic sanctions will impact the Slavic state's ability to produce oil at the current rate. Reuters reports: Read more here. Oil prices hold after Trump-Russia row Oil prices held gains overnight Tuesday after jumping 3% Monday, with supply issues in focus. Trump's continued pressure on Russia over the Ukraine war has raised concerns over how economic sanctions will impact the Slavic state's ability to produce oil at the current rate. Reuters reports: Read more here. Oil prices held gains overnight Tuesday after jumping 3% Monday, with supply issues in focus. Trump's continued pressure on Russia over the Ukraine war has raised concerns over how economic sanctions will impact the Slavic state's ability to produce oil at the current rate. Reuters reports: Read more here. 擷取數據時發生錯誤 登入存取你的投資組合 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤


Boston Globe
16 minutes ago
- Boston Globe
Countries scramble to strike trade deals with Trump as deadline nears
The European Union is, by some measures, America's single most important trading partner, a bloc of 27 nations that collectively make up one of the world's largest economies. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up There are still many details left to work out after Sunday's preliminary agreement. Separate negotiations are continuing this week on major details of the deal, including steel and aluminum tariffs. Advertisement Reactions in Europe have been varied, with some leaders voicing cautious support, while others called the deal unsatisfactory and lopsided. Still, the preliminary deal avoids a worst-case scenario. Nearly every European Union country had voted to support retaliatory tariffs on American imports, which would have started on Aug. 7 if an agreement was not reached. The prospect of retaliation had spread fear among European company executives, who said countermeasures could spark a broader trade war and incite even higher U.S. tariffs. Advertisement Pressure to reach a trade deal has also intensified for South Korea, whose biggest rival in East Asia cut a deal with the United States last week. Trump celebrated the 'massive' deal with Japan and its $550 billion investment in the United States. South Korea's trade and industry ministers were in Washington last week to try to match Japan's deal. But a highly anticipated meeting Friday with Treasury Secretary Scott Bessent and Jamieson Greer, the U.S. trade representative, was canceled because of Bessent's schedule. Commerce Secretary Howard Lutnick said Monday that South Korean officials flew to Scotland to discuss trade with him and Greer as the president secured the deal with the European Union. 'I mean, think about how much they really, really want to get a deal done,' Lutnick said on Fox News. 'But the president is in the driver's seat now. He's done these big deals. He's got really all the cards in front of him.' Lutnick told South Korean officials in Scotland to bring their 'best and final' trade offer to the table, according to Yonhap News. Before leaving for Washington on Tuesday, Koo Yun-cheol, South Korea's finance minister, told reporters that he would discuss a mutually beneficial trade deal involving the country's shipbuilding industry when he meets with Bessent this week, just days before Trump's deadline. Brazil, the world's biggest exporter of coffee, also faces the possibility of steep tariffs if it does not reach an agreement with the United States by Friday. Brazil's vice president, Geraldo Alckmin, is leading his country's tariff negotiations and spoke with Lutnick by phone Monday. Lutnick then signaled that imports of some natural products not plentiful in the United States, like coffee, could be exempt from tariffs -- good news for Brazil. Advertisement Before leaving for Scotland on Friday, Trump remained optimistic about his self-imposed Aug. 1 deadline. 'Most of the deals are finished right now,' he told reporters. Trump announced last week that the Philippines and Indonesia agreed to 19% tariffs, while Australia said it would relax import restrictions on U.S. beef. Trump announced the move on Truth Social and warned that 'other Countries that refuse our magnificent Beef are ON NOTICE.' The Trump administration is still hashing out details of trade agreements that have already been made with some countries, including Britain and China. Trump met with British Prime Minister Keir Starmer to do some 'fine-tuning' of the deal as well as 'a little celebrating' in Scotland. Trump said in June that the United States and China had reached an agreement that would require China to loosen its restrictions on exports of critical minerals. But both countries are still working to hammer out other details of the deal. Top officials from the United States and China agreed on Tuesday to continue discussions about extending a fragile trade truce that is set to expire in mid-August, but did not immediately reach an agreement to avert a potentially destabilizing trade war between the world's largest economies. Notably, one of the biggest U.S. trading partners isn't rushing to solidify a deal before the deadline. Prime Minister Mark Carney of Canada said Monday that Canada was engaged in 'intense' negotiations with the United States but reiterated that his nation would agree only to terms that were in the best interest of Canadians, suggesting that the country might walk away empty-handed. Advertisement 'The assurance for Canadian business, Canadians, is we will only sign a deal that is the right deal that's a good deal for Canada,' he said. Trump expressed the same skepticism that an agreement could be reached with Canada. 'We haven't really had a lot of luck with Canada,' he said. 'I think Canada could be one where there's just a tariff, not really a negotiation.' This article originally appeared in