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Trump Targets Fed Chair Powell Over Renovation Costs

  In a dramatic escalation of his long-standing feud with Federal Reserve Chair Jerome Powell, former President Donald Trump has signaled a potential path to remove Powell from office—citing alleged mismanagement of a $2.5 billion renovation project at the Fed’s Washington headquarters. The renovation, which includes upgrades to aging infrastructure and removal of hazardous materials like asbestos, has ballooned in cost over the years. Trump and his allies claim the project includes extravagant features such as rooftop gardens, VIP dining rooms, and premium marble—claims Powell has publicly denied. The Fed insists the renovations are necessary and cost-effective in the long term, consolidating staff and reducing rental expenses. While the Supreme Court has affirmed that a president cannot dismiss the Fed chair over policy disagreements, Trump may be attempting to build a case for removal “for cause,” alleging Powell misled Congress about the renovation’s scope and budget. Criti...
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Inflation surprises keep Bank of Canada from cutting rates

 

The Bank of Canada (BoC) is expected to maintain its key overnight rate at 5% on Wednesday, despite the sluggish economic growth and the global trend of easing monetary policy. The reason is the persistent inflation pressure that has exceeded the BoC’s 2% target for four consecutive months.

The latest inflation data for December showed a 3.4% increase in the consumer price index, the highest since May 2021. The core inflation, which excludes volatile items such as food and energy, also rose to 2.8%, the highest since June 2019. These numbers surprised the markets, which had anticipated a rate cut by the BoC in the first half of 2024.

However, the BoC is likely to wait for more evidence that the inflation spike is temporary and not driven by underlying demand pressures. The BoC has attributed the high inflation to transitory factors such as supply chain disruptions, higher commodity prices, and base effects from the pandemic. The BoC expects inflation to return to the 2% target by the end of 2025.

The BoC will also release its quarterly Monetary Policy Report on Wednesday, which will provide updated forecasts for the Canadian economy. In October, the BoC projected a 0.8% annualized growth rate for both the third and fourth quarters of 2023, well below the potential output growth of around 2%. The BoC will likely revise down its growth outlook for 2024, reflecting the impact of the Omicron variant, the uncertainty over the fiscal policy, and the weak business investment.

The BoC will also face questions about its communication strategy, which has been criticized for being too vague and inconsistent. The BoC has not provided any forward guidance on its future policy actions, unlike its counterparts such as the Federal Reserve and the European Central Bank. The BoC has also been reluctant to use unconventional tools such as quantitative easing or negative interest rates, which could provide more stimulus to the economy.

The BoC will announce its rate decision and the Monetary Policy Report at 9:45 am ET on Wednesday, followed by a press conference by Governor Tiff Macklem at 11:15 am ET. The markets will closely watch for any hints on the BoC’s policy stance and its assessment of the inflation and growth outlook.

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