You’ve gotta feel bad for Federal Reserve Chairman Jerome Powell.
Since he took over, he’s had to manage the American economy through Covid, post-stimulus inflation, and a bear market in stocks.
His job isn’t getting any easier.
Nowadays, inflation has proven sticky even as job losses mount. Worse, President Trump harsher-than-hoped tariffs make interest rate cut decisions even more challenging. Cut rates, and you risk fanning inflationary flames. Raise rates and you could send the economy into a recession.
The situation means the Fed is backed into a corner, and so far, Powell’s response so far has been “wait-and-see.”
Staying on the sidelines has drawn Powell significant criticism, including from President Donald Trump, homebuyers, and others.
The latest to weigh in? Veteran fund manager Louis Navellier.
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Navellier, a veteran stock picker who has been navigating the stock market since the 1980s, is the founder of Navellier & Associates, a firm with about $1 billion in assets under management.
His comments on the Fed are likely to raise some eyebrows.
The Fed hits the sidelines as the economy stutters
In normal times, the Federal Reserve's job seems simple: Adjust monetary policy to encourage low inflation and unemployment.
However, things are rarely that simple.
Low unemployment and inflation are often competing goals, making the Fed's decision to cut or raise interest rates challenging. Higher rates discourage economic activity, crimping inflation, but increasing unemployment. Lower rates encourage economic activity and increase employment, but boost inflation.
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We've seen this play out in real time over the past few years.
After record-setting stimulus payments and a zero-interest rate policy, inflation spun out of control in 2022, forcing the Fed to engage in the most restrictive rate hikes since former Fed Chair Paul Volcker fought inflation in the early 1980s.
The rate hikes have driven inflation below 3% from over 8%, but they've come at a cost. Unemployment has risen to 4.2% from 3.4%, fewer open jobs are available, and layoffs are climbing.
The latest Job Openings and Labor Turnover Survey, JOLTS, showed 901,000 fewer unfilled jobs in March. Meanwhile, Challenger, Gray, & Christmas reports that employers have announced over 602,000 layoffs this year through April, up 87% year over year.
The uptick in unemployment caused the Fed to shift from rate hikes to dovish rate cuts last September, November, and December. Most economists and Wall Street watchers expected those cuts to continue this year to support the jobs market.
Unfortunately, inflation progress has stalled, and the Fed is hesitant to cut rates more following Trump's newly enacted tariffs.
In February, President Trump slapped 25% tariffs on Canada and Mexico. In April, he instituted a 10% baseline tariff, 25% tariffs on autos, and entered a trade war with China that has left tariffs at 30%. He also announced a slate of reciprocal tariffs on April 2, so-called “Liberation Day,” but he paused most of those tariffs for 90 days to allow for trade negotiations.
The uncertainty associated with tariffs' impact on prices, coupled with the uncertain outcome of trade deals and the uncertain path of the economy, has effectively bound Powell's hands.
On May 8, the Fed held rates unchanged for a third consecutive meeting.
Veteran fund manager lambasts Fed for hesitating on interest rate cuts
The Fed's decision to stand pat this year has infuriated President Trump, who has sternly advocated for rate cuts, ostensibly to help offset the negative consequences of tariffs on the economy.
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“With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” said Trump on Truth Social in April.
President Trump went so far as to suggest he could fire Powell and replace him with someone else. By design, the Federal Reserve is independent to ensure it makes policy based on data rather than shifting political winds.
President Trump has backed off his threat but remains critical.
He's not alone.
More Economic Analysis:
- Fed inflation gauge sets up stagflation risks as tariff policies bite
- U.S. recession risk leaps as GDP shrinks
- Like it or not, the bond market rules all
Louis Navellier has been tracking markets for over thirty years, so he's seen his share of economic and stock market cycles and has had a front-row seat to the interest rate policy decisions made by Fed Chairman Alan Greenspan, Ben Bernanke, Janet Yellen, and now, Jerome Powell.
“The latest excuse to not cut key interest rates, according to Fed Chairman Jerome Powell, is potential ‘supply-side shocks' caused by the tariffs,” said Navellier on his podcast.
Navellier referred to that risk of supply shocks as “mythical.”
“The Fed Chairman said policymakers are considering ‘discrete but important updates to its framework that guides decisions,” noted Navellier in a message to clients. “Translated from Fedspeak, Powell is making new excuses to ignore President Trump, Treasury Secretary Bessent and market rates.”
Navellier's criticism when further, saying the Fed is worrying about an “inflation bogeyman that hasn't materialized.”
More bluntly, Navellier called the Fed's rationale for avoiding interest rate cuts pathetic.”
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