Today, I discussed a topic with my friends, which is whether Powell chose not to cut interest rates due to partisan disputes. Let's start with the agreed viewpoint: The reason is simple: although the Federal Reserve claims independence, it has never truly been a 'vacuum independence', especially in this era of political polarization. Although Powell is a Republican, his re-election was completed by Biden, and this time it is clear that his policy path is highly consistent with the Democratic Party. In Trump's case, there is a big fiscal expansion+tariff increase. According to the normal logic, the monetary policy should be coordinated with interest rate reduction, otherwise the economy will soon be overwhelmed. However, Powell refused to cooperate because of the inflation risk brought by tariffs. This directly leads to a combination of fiscal expansion and monetary tightening, with the market and economy relying solely on leverage to push forward, and pressure being shifted to the capital market and private sector, while the Federal Reserve stands on the side and cannot release water. The Republican Party naturally believes that this is deliberate suppression, after all, if you don't provide liquidity, my fiscal stimulus won't come out either. The Democratic Party is also happy to see its success. Anyway, if you want to engage in tariffs, cut benefits and expand the army, I will let you carry inflation on your own. Powell is actually not stupid. He knows that once the interest rate is cut before the tariff falls, the independence of the Federal Reserve will be completely lost, and it will become the cash machine of the White House. So his current strategy is very clear, not to say "I don't want to help you Trump", but to use tariff inflation as a shield, and drag on. Is this a party struggle? In fact, it is not just a party struggle, but more importantly, the institutional instinct is self-protection. From the Republican perspective, this is financial repression, and from the Democratic perspective, this is institutional hedging against extreme fiscal policies. Let's talk about different perspectives: If we simply interpret Powell from the perspective of inflation, his logic actually makes perfect sense. The current inflation structure faced by the United States is different from the traditional demand side inflation. The biggest risk of this round is imported inflation, and the core source of imported inflation is Trump's tariff. So Powell repeatedly said that without Trump's tariff policy, the Federal Reserve would have already begun to cut interest rates, which is also in line with the market's expectation for the Federal Reserve to cut interest rates last year. If the Federal Reserve chooses to cut interest rates ahead of schedule before the official implementation of tariffs, it would be a monetary policy to complement trade protectionism, fiscal tax increases, and monetary easing, which would double push up inflation. From the perspective of the Federal Reserve, how could they possibly be willing to take the blame? After all, inflation and economic stability are both the responsibilities of the Federal Reserve. If it were to cut interest rates, it would not be beneficial for the Fed, and not cutting interest rates would actually prevent the Fed from taking the blame. So Powell's current attitude is to not make me move until the tariffs are implemented. Otherwise, if we rashly cut interest rates, the US bond rates may come down first, but commodity prices will be directly raised, and inflation expectations will not come down. Instead, it will force the Federal Reserve to passively raise interest rates again in the future, which is the real collapse. You can refer to the era of Paul Walker. So from the pure logic of inflation control, it is indeed reasonable for Powell to hold on and not lower now. The root of the problem lies not in monetary policy, but in the fiscal aspect. The implementation of tariffs itself is a disruption to the supply chain, driving up input costs. The Federal Reserve's toolbox cannot solve this structural problem at all. So overall, different perspectives have led to completely different interpretations of Powell. From the perspective of the White House and the Republican Party, he is obstructing economic stimulus and even carrying the implication of political suppression; But from the perspective of inflation governance, Powell actually chose to serve inflation and refused to take the blame for short-term political interests. In the long run, this choice may not necessarily be wrong, and in a sense, it is actually serving the Republican Party, because if we rashly release water and cooperate with tariffs, inflation will completely spiral out of control, and ultimately backfire on the entire economy. But the problem is also very practical. The Fed's insistence will significantly increase the probability of the United States entering an economic recession, and the cost to the capital market will also be high. So this is essentially a choice question. Either cooperate with Trump and the Republican Party to save the market in the short term, or stabilize inflation in the long term, but neither side can have both. And Powell is currently choosing the latter. This tweet is sponsored by @ ApeXProtocolCN | Dex With Apex