Illustration: Sarah Grillo/Axios

Jay Powell did his best impression this week of a Fed chair making his own data-driven decisions about where he should set short-term interest rates. The reality, however, is that the markets and the president are giving him very little choice.

Driving the news: Powell cut interest rates on Wednesday — the first time the Fed has done so in over a decade. In doing so, he effectively fulfilled a prophecy that the fixed-income markets (and even the stock market) had been making for all of 2019. They saw the rate cut coming long before the Fed was willing to admit it, and they were right all along.

Donald Trump has been just as adamant about the necessity of a rate cut — a big one — and this week he worked out how to get what he wants. After the rate cut a few days ago, the market priced in a 64% chance of another cut in September. Less than 24 hours later, thanks to Trump, that probability had risen to north of 95%.

  • What we're seeing: The most important new word in the official Fed statement was "global." The Fed is no longer just reacting to domestic conditions; it's looking at an economic slowdown around the world, including China. Trump's announcement of new tariffs ensured that global trade will continue to disappoint and the Fed will continue to cut rates.

What they're saying:

"The president and his trade negotiators believe they have downside protection against the possibility that trade policies will cause any lasting damage to the economy or the stock market. After all, the Fed has very publicly shown that it views it as appropriate to cut interest rates to combat any slowdown related to trade wars."
Neil Irwin, The New York Times

The catch: Fed rate cuts are better at protecting the markets than they are at protecting the economy. In any case, as economist Nouriel Roubini notes, the Fed doesn't have nearly enough ammunition to protect against a fully fledged trade war.

The bottom line: Now that the Fed is being treated as a marionette by both the markets and the president, its much-vaunted independence is becoming increasingly insubstantial. The less control that Powell has over the Fed's actions, the less power he has.

Go deeper

6 hours ago - Podcasts

Facebook boycott organizers share details on their Zuckerberg meeting

Facebook is in the midst of the largest ad boycott in its history, with nearly 1,000 brands having stopped paid advertising in July because they feel Facebook hasn't done enough to remove hate speech from its namesake app and Instagram.

Axios Re:Cap spoke with the boycott's four main organizers, who met on Tuesday with CEO Mark Zuckerberg and other top Facebook executives, to learn why they organized the boycott, what they took from the meeting, and what comes next.

Boycott organizers slam Facebook following tense virtual meeting

Illustration: Sarah Grillo/Axios

Civil rights leaders blasted Facebook's top executives shortly after speaking with them on Tuesday, saying that the tech giant's leaders "failed to meet the moment" and were "more interested in having a dialogue than producing outcomes."

Why it matters: The likely fallout from the meeting is that the growing boycott of Facebook's advertising platform, which has reached nearly 1000 companies in less than a month, will extend longer than previously anticipated, deepening Facebook's public relations nightmare.

Steve Scalise PAC invites donors to fundraiser at Disney World

Photo: Kevin Lamarque-Pool/Getty Images

House Minority Whip Steve Scalise’s PAC is inviting lobbyists to attend a four-day “Summer Meeting” at Disney World's Polynesian Village in Florida, all but daring donors to swallow their concern about coronavirus and contribute $10,000 to his leadership PAC.

Why it matters: Scalise appears to be the first House lawmakers to host an in-person destination fundraiser since the severity of pandemic became clear. The invite for the “Summer Meeting” for the Scalise Leadership Fund, obtained by Axios, makes no mention of COVID-19.