Andrew here. What would happen if President Trump actually tried to fire Jay Powell, the Fed chair? Trump has been publicly toying with the idea — and then denying he will do it. Investors and analysts have been gaming out what would happen to bonds, the dollar and stock prices.
Despite vocal calls about the importance of an independent Fed, the prevailing wisdom appears to be that the immediate impact of firing Powell might not be a shock to the system but more of a gradual shift in how global investors think about the U.S. Let me know what you think might happen in practice.
Trump and “the concept of firing” Powell
Stock futures and the dollar are looking relatively stable this morning despite the latest — and perhaps most ominous — threat yet by President Trump against Jay Powell, the Fed chair.
Investors may be playing down the chances that the president will actually try to remove Powell, a task that experts still say would be legally knotty. And it’s certainly possible that Trump is just venting that the Fed isn’t lowering rates fast enough or can continue to be dissuaded from acting.
But at some point, will investors take the president’s threats seriously?
What Trump did: While Trump denied brandishing a draft letter firing Powell as Fed chair at a meeting with House Republicans on Tuesday, The Times reports that he had, with the draft provided by William Pulte, the director of the Federal Housing Finance Agency.
The president said he “talked about the concept of firing” Powell, and that almost everyone at the meeting said he should. (He said on Wednesday that he was considering choosing Kevin Hassett, a close economic adviser, to be the Fed’s next chair.) But Trump said he had no imminent plans to fire Powell — “unless he has to leave for fraud,” citing a multibillion-dollar renovation of the central bank’s headquarters that has become a focus of conservative criticism.
Markets only briefly freaked out at news of Trump’s latest threat. The dollar fell 1.2 percent against a basket of other currencies on Wednesday, while the S&P 500 also tumbled. But both recovered shortly afterward upon the president’s denial. (The Times notes that he often reflexively denies reports about his actions.)
Markets so far have assumed that Trump is “playing chicken,” Tara Sinclair, an economist at George Washington University, told The Times.
That said, The Financial Times notes that the yield on 30-year Treasury bonds rose above 5 percent this week, while the additional interest rate on the long-term debt compared with shorter-dated ones is near a multiyear high. It’s “the reaction you’d expect to see if the market was fretting over central bank independence,” Mike Riddell, a fund manager at Fidelity International, told The FT.
Others are sounding the alarm. Among them are major bank C.E.O.s, who joined Jamie Dimon of JPMorgan Chase in defending the Fed’s independence. “I think central bank independence, Fed independence, is very important and it’s something we should fight to preserve,” David Solomon of Goldman Sachs said on Wednesday.
Michael Feroli, JPMorgan’s chief U.S. economist, wrote in a note to investors on Wednesday that “the immediate crisis may have passed, though we doubt we are entirely done with this saga.”
HERE’S WHAT’S HAPPENING
Producer prices held steady in June, but reflected some impact from tariffs. The latest Labor Department Producer Price Index, released on Wednesday, showed that President Trump’s levies drove up the wholesale cost of goods, an increase offset by a drop in the cost of travel-related services. It’s the latest sign that tariffs are starting to affect the broader economy, keeping the Fed in a wait-and-see mode when it comes to interest-rate cuts.
A Canadian retailer calls off its takeover bid for 7-Eleven’s Japanese parent company. Alimentation Couche-Tard, which had sought to buy Seven & i for a year for $47 billion, accused its counterpart of a “calculated campaign of obfuscation and delay” and a lack of “sincere or constructive engagement.” The move ends speculation about a high-priced takeover drama that also drew in the son of Seven & i’s founder, who made his own acquisition bid.
Trump administration officials are said to be delaying Nvidia’s big Emirati deal. Some federal officials are concerned that the plan — in which Nvidia would sell billions of dollars’ worth of high-end artificial intelligence processors to the United Arab Emirates — could open the door to China obtaining some of the chips, The Wall Street Journal reports. The U.A.E. is under pressure to agree to changes in the plan, including not allowing G42, a major Emirati A.I. company, to have any chips.
An online firearms retailer backed by Donald Trump Jr. falls in its trading debut. Shares in GrabAGun, a marketplace for guns and ammunition, slid nearly 24 percent on Wednesday after the company went public via a merger with a blank-check company. GrabAGun’s investors include 1789 Capital, an investment firm whose partners include Trump Jr.; it focuses on companies with appeal to conservatives.
Tech offers Mamdani a warmer reception
For the second day in a row, Zohran Mamdani met with business executives to talk policy — and try to persuade skeptics that a democratic socialist could effectively run the capital of capitalism.
Wednesday’s crowd of technology leaders and investors appeared to give the Democratic candidate for New York City mayor a warmer welcome than he received at Tuesday’s gathering.
A recap: Wednesday’s 90-minute meeting was hosted by the Partnership for New York City (which also arranged Tuesday’s gathering), the advocacy group Tech:NYC and the venture capital firm AlleyCorp. About 150 people attended.
Mamdani addressed many of the same topics raised on Tuesday, including taxes, housing and his views on Israel and the war in Gaza. He also spoke about how to make New York’s government more efficient and the importance of tech to the city’s economy.
The crowd may have been more predisposed to be receptive to Mamdani, some attendees of Wednesday’s event told Lauren Hirsch. Among the reasons is that Mamdani is a digital native whose rise was powered by skillful use of social media: “He speaks a language that a lot of people in that room, younger start-up founders, also speak,” Julie Samuels of Tech:NYC said.
Still, Mamdani has drawn plenty of criticism from conservative tech figures, including the venture capitalist Shaun Maguire of Sequoia. And while tech companies may be less likely to actually leave New York, as many financiers have threatened to do, they still care about public policy issues like safety and housing affordability as keys to drawing and retaining talented workers. (Some executives have cited San Francisco’s struggles in recent years as being a boon for New York’s tech scene.)
The verdict:
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Attendees “came out of the meeting feeling slightly better about him than they did going in,” Kevin Ryan of AlleyCorp told DealBook. “Many people were impressed by how well spoken he is, how smooth he is, what a good politician he is — and I mean that in good and bad ways,” Ryan added. “He can be very vague in answering questions.”
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“I think people in the room heard that he wanted to work with the people in the room, with the tech industry, to think about ways of making the city work better, but I don’t think there was a clear prescription as to how,” Samuels added.
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“I was glad to see him being open to new ideas and working with people outside his base,” Yoni Rechtman, a Brooklyn venture capitalist, told Business Insider.
“For something as consequential as your child, I don’t think people want to roll the dice.”
— Noor Siddiqui, the founder of Orchid, a start-up that says it can sequence an embryo’s genetic information and provide scores measuring the likelihood of a child developing ailments like Alzheimer’s. Orchid has found favor in Silicon Valley circles — Shivon Zilis, the mother of four of Elon Musk’s children, is reportedly a client — but critics say its technology is flawed and could lead people to discard perfectly good embryos.
A deep dive into the housing shortage
Economists and analysts have pointed out that much of the U.S. is grappling with a housing supply crunch. But a new report from Moody’s Analytics points to a part of the market that policymakers should pay more attention to: middle-income rental housing, Danielle Kaye writes.
Here are some key takeaways.
The housing shortage is a hyper-local issue. Supply constraints vary widely even within cities themselves, from neighborhood to neighborhood. Take Philadelphia: Despite not having a “meaningful” shortage in overall rental supply, a census tract-level analysis shows substantial shortages in middle-income areas in the northeast of the city and in lower-income areas in the north-central, west and southwest.
“The imbalance between the nation’s housing demand and supply is much more localized than the national numbers and public dialogue suggest,” the report’s authors write.
Where the deepest shortfalls are: There is some support for creating affordable housing in low-income communities, while there tends to be adequate supply for upper-income ones. But those in the middle end up falling through the cracks, according to the report.
And while many markets around the country face an undersupply of homes for sale, especially entry-level ones, the majority of the shortfalls are in rental markets, the authors add.
A few datapoints:
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Overall, the U.S. has a housing deficit of roughly two million homes.
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The Southeast, the industrial Midwest and parts of the Southwest face the most acute shortages.
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More than three-fourths of metro areas are dealing with a housing shortage, with Newark, Cincinnati and Little Rock, Ark., having the biggest shortages.
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In cities with more than one million people, there are housing shortages of rental homes in all census tracts — except the high-income bracket.
“This research would suggest we’ve been focused on the wrong thing,” Mark Zandi, chief economist at Moody’s, told DealBook. “If we’re going to try to address the housing shortage in a more timely way, it’s probably better to focus on work force rental housing.”
He added, “It just illustrates the need to be really focused on localities, and not get lost in the national or even the state or metro area.”
THE SPEED READ
Deals
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Investors have reportedly suggested they were interested in valuing Anthropic at $100 billion in a future funding round, given the artificial intelligence start-up’s financial performance. (The Information)
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Hewlett Packard Enterprise reached a settlement with Elliott Investment Management, including agreeing to work with the activist hedge fund on ways to bolster its stock price. (Bloomberg)
Technology and artificial intelligence
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The E.U. is said to have slowed an investigation into Elon Musk’s X social network as the bloc seeks to reach a trade deal with the U.S. (FT)
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“Why crypto giant Tether bought a South American farming company” (Reuters)
Best of the rest
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President Trump said Coca-Cola would start making Coke sold in the U.S. with cane sugar, as it is in Mexico. “MexiCoke” aficionados aren’t exactly excited. (NYT)
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Americans are consuming more protein than ever. It’s transforming the U.S. dairy industry. (NYT)
We’d like your feedback! Please email thoughts and suggestions to [email protected].
Andrew Ross Sorkin is a columnist and the founder of DealBook, the flagship business and policy newsletter at The Times and an annual conference.
Bernhard Warner is a senior editor for DealBook, a newsletter from The Times, covering business trends, the economy and the markets.
Sarah Kessler is the weekend edition editor of the DealBook newsletter and writes features on business.
Michael J. de la Merced has covered global business and finance news for The Times since 2006.
Danielle Kaye is a Times reporter, covering business and policy for the DealBook newsletter.
Lauren Hirsch is a Times reporter who covers deals and dealmakers in Wall Street and Washington.
The post Will Investors Ever Believe Trump’s Threats Against Powell? appeared first on New York Times.
