The Fed Owns Both Teams

OP Ed - Gregory R Lai, CFA

Independence? Or theater? Every few months, headlines flare about “protecting Federal Reserve independence.” The outrage feels staged. How independent can the Fed be when its charter points in two directions at once? The dual mandate—price stability and maximum employment—is less a compass than a hall pass.

Imagine one owner controlling both the Dodgers and the Yankees in the World Series. The outcome isn’t competition, it’s choreography. The Fed, by design, plays both sides of the ball. Raise rates to cool inflation? “Mandated.” Cut rates to juice jobs? Also “mandated.” Independence isn’t principle, it’s choosing which half of the mandate to lean on this cycle.

Call from the Dugout

For all the talk of insulation from Washington, Fed chairs are appointed by White Houses. Each administration picks its central banker like a franchise naming a manager—someone aligned enough to call the right plays. That doesn’t make the Fed a partisan actor, but it makes independence sound laughable. You can’t claim separation from the dugout when the owner picked you for the job.

The Fed’s Playbook has a rich history

• Paul Volcker: the long-ball slugger, swinging with double-digit rates to crush inflation.

• Alan Greenspan: small-ball strategist—incremental moves, bunts, singles, and the legendary “briefcase.”

• Ben Bernanke: rewrote the rulebook in 2008—quantitative easing as a grand slam.

• Janet Yellen: tried to shrink the field, but once the fences move, they don’t move back.

• Jay Powell: the traded player—drafted by Obama, promoted by Trump, re-signed by Biden. He’s worn three uniforms but still insists he plays for the game, not the owner.

  
  

The Scoreboard Today

The crowd is booing despite the numbers on the board:

• Unemployment: 4.3%

• PCE inflation: +2.7% (core 2.9%)

• GDP growth: positive

• Tariffs: $25B/month in revenue, projected to trim ~$4T in deficits over the decade

• Dot plot: two more cuts expected in 2025, with unemployment capped at ~4.5%

  
  

Yet markets grumble like pampered children who’ve forgotten the bad old days. Independence becomes the excuse for that grumbling, not the reality on the field.

Balls and Strikes with a Broken Radar Gun

Even the data the Fed leans on is suspect. The Bureau of Labor Statistics missed the housing inflation surge by a mile—“owners’ equivalent rent” turned into a statistical hall of mirrors. Anyone renting or buying felt the squeeze in real time, but the official gauges lagged. The Fed was calling balls and strikes with a broken radar gun, making million-dollar inning decisions off a scoreboard that wasn’t even showing the right score.

The Paradox

So which game is the Fed really playing? Small ball—quarter-point tweaks and carefully worded statements? Or swinging for the fences—trillions in balance-sheet expansion, rewriting innings with one stroke? Either way, it isn’t independent baseball. It’s scripted by the owner, performed for the crowd. Steinbrenner anyone?

The paradox is simple: the Fed is both referee and participant. The dual mandate is a hall pass, not a compass. And for investors, the warning is clear: be wary of those who claim control—and always check who’s warming up in the bullpen.

“PS…Now if Ohtani were the Fed Chair, he’d raise and cut rates in the same inning — and still hit five home runs.”