MW Thank 'Too Late' Jerome Powell for the jobs and inflation beats

By Brett Arends

Will the president's Federal Reserve nominee Kevin Warsh be as tough?

America wins because the Fed chairman refused to kowtow to the Oval Office.

The big news from the economy this week is that inflation is coming down, the jobs market is better than expected and real wages are rising.

So Federal Reserve Chair Jerome Powell and his colleagues are getting credit for a job well done, right?

Not a chance. The president was on TV this week with his former chief economic adviser, and both of them were badmouthing Powell and his stewardship of the Fed. The administration has launched a criminal investigation into the chairman, and is also trying to fire the deputy chair using the old Soviet Union trick generally known as Beria's law.

This is a potential worry for retirees - and everyone else who owns bonds or who relies on their investments for income. Inflation is terrible for retirees; falling inflation is good. Inflation is falling right now only because Powell has ignored the gibberish and insults from the Oval Office for a year and stuck to his guns.

The question now is: Will Kevin Warsh, the president's pick to be the next Fed chairman, show the same independence and guts?

We have no idea. Wall Street is hopeful: The market reaction since Warsh was announced as the nominee has been positive. But if Warsh really is going to steer a path completely independent of the president, you have to ask how he got the nomination.

This is not a president who tolerates any disloyalty or dissent (just ask Marjorie Taylor Greene). As he explained on TV this week, the president really, really wants the Fed to slash short-term interest rates - at least by half, and possibly to match Switzerland at 0%.

At this juncture, it is useful to look at where we are and where we go next.

Make no mistake: Falling inflation and strong jobs, if those numbers persist, are Powell's achievements. He was put under unprecedented pressure to slash short-term rates prematurely. The president publicly labeled him "too late," a "loser" and more, and insisted nearly all last year that short-term rates should be 1% or even lower. (The president also called the Fed chairman a "numbskull.") The vice president, meanwhile, said Powell was guilty of "monetary malpractice." And the president's attorney general launched a criminal investigation into him.

Where would the economy be if the Fed had buckled to the political pressure? We can only imagine. But you would walk a long way to find a single economist anywhere who thinks inflation would be coming down if interest rates had been slashed last year - especially if, as the president wanted, they were slashed to 1% or lower.

And this is your regular reminder to remember the context when the media and politicians talk about the Fed and "interest rates." There are lots of interest rates in the economy; the one that the president wanted Powell to cut was the overnight fed-funds rate.

Probably more important for the entire economy are other interest rates that the Fed does not control directly, and may only influence indirectly. These include the critical interest rate, or yield, on the 10-year Treasury note BX:TMUBMUSD10Y, plus the extra interest on top of that that corporations have to pay to issue their own bonds.

And when you look there, you'll see that Jerome Powell and the Fed have cut rates - big time.

The yield on the 10-year Treasury - 4.6% when the president took office last year, and 4.47% as recently as last summer - tumbled again Friday morning to below 4.1%.

Meanwhile, U.S. companies can borrow money more cheaply than they could when the president was inaugurated last year. That means they can get easier access to money to invest and boost the economy. The average yield charged on bonds has fallen both for investment-grade companies and for riskier high-yield bonds.

And that's despite a big jump in their interest rates last spring, when the president's ill-fated "liberation day" fiasco plunged markets into turmoil.

All of this is good news for the economy, and especially for those who live on fixed incomes.

If inflation continues to fall, next year's Social Security cost-of-living adjustment, or COLA, will be less than this year's. That's good news - actually, it's excellent news. The higher the COLA, the worse it is for seniors, because it means inflation is higher. And the COLA comes a year in arrears.

Meanwhile, the only longer-term Treasury bonds I own are inflation-protected TIPS. I underperform the bond market on big "up" days - but I sleep at night.

-Brett Arends

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February 13, 2026 14:20 ET (19:20 GMT)

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