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Illustration: Sarah Grillo/Axios

There's never been a Federal Reserve interest-rate decision quite like this, with the central bank facing public criticism from the president and a whipsawing stock market.

Why it matters: Market watchers agree that one of the greatest threats to the smoking economy is a misjudgment by the Fed on how to manage the record-breaking economic expansion. Trump's response to any rate hike is likely to be angry, losing the Fed's precious credibility among the president's supporters.

Later today, Jerome Powell will likely announce the fourth rate hike since he took over the Fed in February. The new target rate, 2.25–2.50%, will be the highest in a decade.

Flashback: Trump slammed Powell hours after the Fed announced a rate hike in September.

  • No other president has commented on monetary policy as much as Trump. Don't be surprised if there's a similar reaction from him this time.
  • Powell has taken pains to emphasize that his decisions are data-dependent. Trump, by contrast, would rather trust his gut on monetary policy, telling Powell yesterday to ignore "meaningless numbers" and "feel the market."

After Powell softened his rate hike stance last month, some economists expect a "dovish hike" — or a rate hike coupled with a more cautious tone about the economy, hinting that the Fed may hike rates fewer times in 2019 than previously indicated.

  • This is the best-case scenario for the stock market, which responds positively to a less aggressive Fed.

The odds: There is a roughly 31% chance that the Fed doesn't raise rates at all. That wouldn't necessarily be better news than a "dovish hike."

  • A rate pause would jeopardize the Fed‘s credibility. It would leave the central bank wide open for a victory lap from Trump and raise questions about whether the Fed has become politicized.
  • The move could also spook the markets. "Investors would assume the Fed had knowledge of some impending crisis about which they are unaware," says Nicholas Colas, co-founder of DataTrek Research.

The bottom line: No other Fed chairman has faced a challenge like the one Powell is facing. When Powell fields questions from reporters after the policy decision this afternoon, expect him to defend the Fed's political independence, maintain an upbeat (but not too upbeat) tone about the economy, and assure investors the Fed is not on a fixed path to hike interest rates even more.

Go Deeper:

Go deeper

Updated 7 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: Large coronavirus outbreaks leading to high death rates — Coronavirus cases are at an all-time high ahead of Election Day — Fauci says U.S. may not return to normal until 2022
  2. Politics: Top HHS spokesperson pitched coronavirus ad campaign as "helping the president" — Space Force's No. 2 general tests positive for coronavirus
  3. World: Taiwan reaches a record 200 days with no local coronavirus cases — Europe faces "stronger and deadlier" wave France imposes lockdown Germany to close bars and restaurants for a month.
  4. Sports: Boston Marathon delayed MLB to investigate Dodgers player who joined celebration after positive COVID test.
Dan Primack, author of Pro Rata
3 hours ago - Economy & Business

Leon Black says he "made a terrible mistake" doing business with Jeffrey Epstein

Photo illustration: Sarah Grillo/Axios. Photo: Rick Friedman/Corbis/Getty Images

Apollo Global Management CEO Leon Black on Thursday said during an earnings call that he made a "terrible mistake" by employing Jeffrey Epstein to work on personal financial and philanthropic services.

Why it matters: Apollo is one of the world's largest private equity firms, and already has lost at least one major client over Black's involvement with Epstein.

3 hours ago - World

Jeremy Corbyn suspended by U.K. Labour Party over anti-Semitism report

Photo: Christopher Furlong/Getty Images

The U.K. Labour Party has suspended its former leader, Jeremy Corbyn, after a watchdog report found that the party failed to properly take action against allegations of anti-Semitism during his time in charge.

Why it matters: It represents a strong break by Keir Starmer, Labour's current leader, from the Corbyn era and one of the party's most persistent scandals.