FOMC Minutes preview: Powell vs. Trump, the ultimate battle

Minutes of the US Federal Reserve meeting that took place at the beginning of August will be out this Wednesday and may have passed unnoticed if it weren't by a new attack from US President  Trump to the Fed's monetary policy.  

The statement released back then presented little changes to the previous one´s language, but was generally positive, as despite the Fed left rates unchanged as expected, policymakers upgraded their view on the US economy, in line with two more rate hikes this year. The word "strong" was applied to describe the labor market, the rate of economic growth, and to household spending.  Fed officers also discussed the downside risk from protectionist measures.

Anyway, late Monday, US President Trump once again complained about the Fed's monetary policy decisions, saying that he expected Powell to be "a cheap-money Fed chairman." Is not the first time he does it, and so far, Powell has been ignoring such rhetoric. In fact, and ahead of tomorrow's release, rumors made the round that the Fed's head has no plans to ever let Trump's comments impact the central bank's decisions.

The document is expected to provide additional information and all of the aforementioned issues but probably won't include a single line on Trump.  The main focus will be again, whether the ongoing protectionism policy could affect future FOMC decisions and to what degree.

On inflation, no big surprises are expected: the central bank will likely reiterate that the monetary policy will remain "accommodative" as inflation continues progressing toward Fed's 2.0% target,  with fluctuating levels around it not being a big concern at the time being.  

Overall, however, market participants expect the Fed to say that the gradual rate hikes remain appropriate.

At the time being, seems that Trump's criticism overshadowed US-China trade war effects on Fed's decision for speculative interest, but the Minutes will likely answer questions on the second, rather than on the first.

Powell is a gentleman and will likely hold his tongue, but don't dismiss a future response if Trump's tantrums continue in time. However, and as long as Powell's mandates last, the all mighty US President will have to deal with higher rates and a higher USD.