It is too early to talk about a head-to-head collision between the Fed and the White House, but the question is one of those big “ifs” that sit out on the horizon of possible developments. One thing that is certain is that Chairman Powell is a thoughtful and consensus-driven player within the Federal Reserve System and thus far has carefully steered between Congress and President Trump’s criticisms. He is also weighing the consequences of a late-cycle economic surge, rising federal debt levels and the inevitable next recession. The judgement of Greenspan on Powell is worth noting, “Jay Powell is a first rate Federal Reserve chairman. This guy knows what he’s doing. I’ve known him for years. He’s extremely competent. His competence is such that I don’t worry about where the Fed’s going.”

The December Fed meeting should provide a test—there is a very good chance that as long as the economic data is supportive (as this is a fact driven institution)—the Fed will raise rates again. The President will no doubt react again. That said, if the market ructions that hit in October continue and economic data indicates a cooling, the Fed cycle may be shorter than currently forecast. The Fed, like everyone else, does not wish to be blamed for the next recession. After all, it is not crazy.

Scott B. MacDonald is chief economist for Smith’s Research and Gradings.

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