Blain’s Morning Porridge January 12th 2026:Rolling the Dice on the Fed And Inflation“Luck, if you’ve ever been a lady to begin with, Luck bea Lady tonight..”Trump has shattered conventions on politics and diplomacyso why not financial markets as well? The Show Trial of Jerome Powell will see Trump seize the levers of monetary policy. For markets its dead simple – what will it mean for the economy and the rising prospects of a Stagflationary Bust inthe US?You can’t help but wonder about markets…. Are they actually paying attention? Last week, amidst the hurly burly of foreign entanglements, US stocks hit record highs before settling back, but then rallied again as job creation in the US economy slowed– thus justifying further easing. There feels to be a somewhat Pavlovian reaction to liquidity and price these days as markets anticipate sustaining rate cuts.On Friday I asked a rhetorical question: what will Trump donext week? Now we know. Add political Witch Hunts to the charge sheet against him. He’s broken every rule in politics and diplomacy, so why not in financial markets also…?What is likely to happen next is becoming clearer. This morning markets will open to the news Federal ReserveHead Jerome Powell is under criminal investigation for the unforgivable crime of denying the President the swift interest rate cuts he has repeatedly demanded. It will be show-trial pure and simple. Despite the charges against Powell overturningeverything we’ve come to base modern finance upon, (the independence of central banks and the detachment of politicians from the reigns of monetary policy), Trump will seize de-facto Fed Power at some point in the next few months.Markets will be pricing for that reality. You can read the Morning Porridge by subscribing on ⁠www.morningporridge.com⁠, and have it delivered fresh to your inbox every morning!

Ask this episode

“What did the council decide on item 42?” — answered with the speaker and the moment.

Transcript

Related