Markets reset Fed bets

The Justice Department said Friday it is closing its investigation into Federal Reserve renovation overruns under Chair Jerome Powell. (reuters.com) U.S. Attorney Jeanine Pirro said the move removes an obstacle to Kevin Warsh, President Donald Trump’s nominee to lead the central bank. Powell’s term as chair ends on May 15. (reuters.com) (abcnews.com) Markets had treated the probe as a political risk around the Fed’s leadership and independence. With that risk reduced, traders reset bets on who will run the Fed and how soon policy might change. (reuters.com) (thestreet.com) That does not mean rate cuts are suddenly locked in. At his Senate Banking Committee hearing on April 21, Warsh said Trump “didn’t ask for it” when asked whether the president demanded lower rates. (abcnews.com) (cnbc.com) Warsh also told senators he would keep distance from the White House on rate decisions. That matters because Trump has repeatedly said he wants lower interest rates, while Fed officials say policy should respond to inflation and employment data. (politico.com) (reuters.com) For households, the immediate question is whether mortgages, auto loans and credit-card rates will fall. ABC reported economists do not expect a Warsh chairmanship by itself to produce large or immediate policy changes. (abcnews.com) The backdrop is a weaker consumer mood. The University of Michigan’s final April reading fell to 49.8 from 53.3 in March, which Reuters reported as a record low, even after improving from the mid-month 47.6 reading. (reuters.com) (money.usnews.com) So the market reset is really about two clocks running at once: the Fed leadership fight ahead of May 15, and the slower path of inflation and growth data that will shape actual rate decisions. (reuters.com) (abcnews.com)