Category: Market Action

Wholesale inflation in the States is basically flat, but this came at the apparent expense of domestic profit margins:

Producer prices unexpectedly fell 0.1% in August, cooling annual inflation to 2.6% from a downwardly revised 3.1% in July, according to Bureau of Labor Statistics data.

Helping to drive prices lower was a 1.7% drop in trade services, a category reflective of producers, wholesalers and retailers’ profit margins. If margins are shrinking, it could be an indication that businesses are using those to eat higher costs, economists have said.

The trade services category can be highly volatile; however, August’s drop is the biggest monthly decline there in more than a year.

When excluding highly volatile components like trade services, as well as food and energy, the underlying inflation trend appears less rosy: Prices rose 0.3% from July and ticked up to 2.8% for the 12 months ended in August.

Meanwhile, Miran made it through committee en route to the Fed governor nomination:

On Wednesday, Stephen Miran’s nomination to become a Fed governor got the green light in a procedural Senate committee vote Wednesday. Soon, all 50 senators will vote on whether to confirm him — a hurdle Miran is expected to clear in time to join the Fed for its rate-setting meeting next week.
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In written responses to the banking committee, released Tuesday, Miran said that, if confirmed, he won’t commit to resigning when the governor term ends in January if a permanent successor hasn’t been named. When Trump nominated Miran last month, he said it would be a temporary appointment to finish out Kugler’s unexpired term. Miran, currently the chair of the Council of Economic Advisers, reiterated that plan last week during his confirmation hearing.

But Lisa Cook remains in office:

A federal judge late Tuesday blocked President Donald Trump’s unprecedented effort to fire Federal Reserve Governor Lisa Cook.

“President Trump has not identified anything related to Cook’s conduct or job performance as a Board member that would indicate that she is harming the Board or the public interest by executing her duties unfaithfully or ineffectively,” Judge Jia Cobb, an appointee of former President Joe Biden, wrote, as she granted Cook’s request to stop the attempted firing.

The decision comes just weeks after Trump said he fired Cook — the first Fed governor ever to be fired by the president. The administration is expected to appeal Cobb’s preliminary injunction, which ensures the Federal Reserve must keep Cook on as a governor while the legal challenge plays out.

Cobb said on first look Cook’s claim that she was improperly fired is a valid one and that it violated her rights under the Fifth Amendment. At the same time, the judge, who sits on the federal bench in DC, said she believed the issue brings up new legal questions that need to be addressed over the long term.

“President Trump’s actions and Cook’s resulting legal challenge raise many serious questions of first impression that the Court believes will benefit from further briefing on a non-emergency timeline,” Cobb wrote. “However, at this preliminary stage, the Court finds that Cook has made a strong showing that her purported removal was done in violation of the Federal Reserve Act’s ‘for cause’ provision.”
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“The Court finds that permissible cause for removal of a Federal Reserve Governor extends only to concerns about the Board member’s ability to effectively and faithfully execute their statutory duties, in light of events that have occurred while they are in office,” the judge wrote.
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“While admitting that the President cannot remove an official for policy disagreements, the Government claims … a removal on the grounds of a policy disagreement would nevertheless be unreviewable,” Cobb wrote.

“This cannot be the case,” she added. “Such a rule would provide no practical insulation for the members of the Board of Governors. It would mean that the President could, in practice, ‘remove a member … merely because he wanted his own appointees on the’ Board of Governors.”
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If Cook, a Biden appointee, is successfully removed, it would leave only two Fed governors appointed by a Democratic president on the seven-member board.

“We’ll have a majority very shortly,” Trump said during a recent Cabinet meeting. “So, that’ll be great. Once we have a majority, housing is going to swing, and it’s going to be great.”

Wow. Trump is going to be surprised when he finds out that American residential mortgages are priced off the 10-year bond, not policy rates.

And the jobs number statistics operation is being checked:

The Department of Labor is initiating an investigation into how the Bureau of Labor Statistics collects and reports “closely watched economic data,” according to a letter the department’s Assistant Inspector General for Audit, Laura Nicolosi, sent to Acting BLS Commissioner William Wiatrowski on Wednesday.
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While members of the Trump administration said on Tuesday that the annual revisions are a sign that the president inherited a worse economy from former President Joe Biden, they’ve also said that it’s proof that changes need to be made at the BLS to improve the accuracy of data.
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At the same time, BLS officials have, for more than a decade, sounded alarm bells about being too underfunded and too understaffed to implement the necessary practices to modernize data collection, analysis and reporting. In recent months, the agency has cited staffing challenges as the reason for reduced collections on critical inflation data.

In addition to employment data, Nicolosi’s letter specified that her team’s investigation would also focus on “challenges and related mitigating strategies” for two of the BLS’ most closely tracked monthly inflation reports: the Consumer Price Index and the Producer Price Index.

Wait until the Trump administration learns that quality costs money! That’ll be fun.

PerpetualDiscounts now yield 5.63%, equivalent to 7.32% interest at the standard conversion factor of 1.3x. Long corporates yielded 4.87% on 2025-9-9 and the price of the fund increased from 15.22 (2025-9-9) to 15.29 (2025-9-10), or 46bp, with a duration of 12.27 (BMO does not specify what kind of duration; I will assume Modified) implying a yield decrease of 4bp, implying in turn a 2025-9-10 yield of 4.83%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 250bp, a sharp widening from the 230bp reported September 3.

The annual revision of the US jobs numbers came with a surprise:

The American jobs market has been running in a much lower gear than previously thought, according to a preliminary report released Tuesday.

The US economy added about 911,000 fewer jobs than initially estimated for the year ending in March, the Bureau of Labor Statistics report suggests. If this were to hold – the final annual benchmark revision will be reported in February 2026 – it would be the largest annual revision to US jobs data on record.

Tuesday’s revisions release is the first step in BLS’ annual benchmark review of jobs data, a process that has taken place in some shape or form going back 90 years.
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The preliminary benchmark revision of -911,000 came in on the high end of economists’ estimates and accounts for about a 0.6% share of overall employment. The annual benchmark revisions during the past 10 years had an absolute average of 0.2% of total nonfarm employment, BLS data shows.

If spread out through the year ended in March, the revision would lower the average monthly job gains by nearly 76,000 positions between April 2024 and March 2025. As it stands now, job growth during that period was 146,500 per month.

If finalized, this downward revision would bring that to about 70,500 per month, BLS data shows.
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Economists said Tuesday that the massive revision was probably attributable in part to the pandemic throwing out of whack the so-called birth-death model, a longstanding statistical tool that’s used to measure business and job creation.

Prior to Tuesday’s release, economists predicted that a large downward revision was likely due to three primary factors: weaker-than-inferred job creation at new firms; sampling errors resulting from declining survey response rates; and, adjustments for asylum-seekers and other undocumented workers.

I haven’t seen any political reaction to this; perhaps because it’s too much of a hot potato!

The SURVEY OF CONSUMER EXPECTATIONS came out today:

August Survey: Inflation Expectations Up at Short-Term Horizon; Consumers’ Job Finding Expectations Drop to Series Low

Median inflation expectations ticked up 0.1 percentage point (ppt) to 3.2 percent at the one-year-ahead horizon and were unchanged at 3.0 percent at the three-year-ahead and at 2.9 percent at the five-year-ahead horizon.

The mean perceived probability of finding a job if one’s current job was lost fell markedly by 5.8 ppt to 44.9 percent, the lowest reading since the start of the series in June 2013.
Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased by 1.7 ppt to 39.1 percent. The mean perceived probability of losing one’s job in the next 12 months ticked up by 0.1 ppt to 14.5 percent.

The median expected growth in household income remained unchanged for the second consecutive month at 2.9 percent in August. Median household spending growth expectations increased by 0.1 ppt to 5.0 percent.

And the Fed has a new high-profile defender:

While many CEOs have stayed silent during President Donald Trump’s attacks on the Federal Reserve, hedge fund billionaire Ken Griffin is speaking out about the dangers.

Trump risks “stoking both higher inflation and higher long-term rates” by undermining the independence of the Fed, Griffin co-wrote in an op-ed in The Wall Street Journal on Sunday titled “Trump’s risky game with the Fed.”

“The president’s strategy of publicly criticizing the Fed, suggesting the dismissal of governors and pressuring the central bank to adopt a more permissive stance towards inflation carries steep costs,” wrote Griffin, CEO of Citadel; and Anil Kashyap, a professor at the Chicago Booth Business School and a consultant to the Chicago Fed’s research department.

The duo warns that history shows how this strategy can backfire, including the Nixon-era pressure on the Fed in the 1970s that set the stage for the Great Stagflation crisis.
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The warning represents a rare reprimand from a CEO at a time when many business leaders have tried to steer clear of publicly criticizing the president and others have gone out of their way to curry favor. Big bank CEOs publicly defended Fed independence this summer, while avoiding criticizing Trump directly.

Griffin, who has said he voted for Trump in last November’s election, has repeatedly slammed the administration’s trade war.

LCS.PR.A closed at 11.94 today, +3.38%, erasing over half of Friday’s loss … and providing a textbook illustration of the term “market impact”. But fear not, investment professional bonus fans! Friday’s trading will have resulted in a selling price for the position not very far from the VWAP on that day; therefore the trading was perfect; the trader and the portfolio manager (assuming these are different people) have nothing to be blamed for … even assuming the boss notices.

Jobs, jobs … whoopsy!:

The labor market appears to be stalling.

The economy added only 22,000 jobs in August, well below the number that forecasters had expected. That suggests employers’ appetite for new recruits has faded markedly in the last several months.

The unemployment rate rose very slightly to 4.3 percent, and wages grew at 3.7 percent over the past year, the lowest growth since July 2024.
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With revisions, the labor market now appears to have lost 13,000 jobs in June, the first negative number since December 2020. In total, numbers for the previous two months were revised down by 21,000 jobs.

Meanwhile, in the frozen north:

The Canadian economy shed 66,000 jobs in August and the unemployment rate jumped to 7.1 per cent, the latest signs that the labour market is reeling from prohibitive U.S. tariffs.

Outside of the pandemic, the unemployment rate now resides at the highest level since 2016, Statistics Canada said Friday in a report, rising from 6.9 per cent in July. The numbers show that the bulk of job losses in August were in part-time work.
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The data also suggested a more concerning trend: that employment decreases have spread beyond manufacturing and resources – directly hit by tariffs – to the broader service sector. In particular, the professional and scientific sectors saw 26,000 job losses, or a 1.3-per-cent decline in employment.
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Returning students are facing the worst job market in 16 years (excluding the pandemic), according to youth unemployment data from Statscan. Between May and August this year, the unemployment rate for that demographic stood at 17.9 per cent. It was 18 per cent in the summer of 2009.

The market responded:

Market-implied odds of a quarter-point rate cut by the Bank of Canada this month surged to about 90% in the wake of weaker-than-expected jobs reports this morning in both Canada and the U.S. Most economists are also now expressing confidence a rate cut is coming.
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Implied interest rate probabilities in overnight swaps markets now show about a 90% probability of a 25 basis point BoC cut on Sept. 17, up from about 75% prior to the data and about 65% on Thursday. Those market bets for a rate cut have been trending higher throughout this week, and were only at about 40% last week before a sluggish GDP reading was released for the second quarter on Friday. A series of dovish remarks from Federal Reserve officials and weak U.S. economic readings earlier this week had already been persuading traders to raise their bets for a rate cut in both the U.S. and Canada.

Market-based odds of a Federal Reserve rate cut on Sept. 17 (both central banks will make their policy decisions that day) also further rose following the release of the U.S. jobs data. Three Fed rate cuts are now priced into the market by the end of this year.
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Meanwhile, U.S. and Canadian bond yields moved sharply lower across the curve. The U.S. 10-year bond yield was down about 10 basis points to 4.079% after the jobs reports, and the 2-year was also down by about 10 basis points.

Canada’s five-year yield, which is particularly closely watched because of its influence on fixed mortgage rates, was down about 9 basis points at 2.805% – its lowest level since the start of June.
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Here, in detail, is how implied probabilities of future interest rate moves stood in swaps markets moments for Canada after the jobs report Friday. The current overnight rate is 2.75 per cent. While the bank moves in quarter-point increments, credit market implied rates fluctuate more fluidly and are constantly changing. Columns to the right are percentage probabilities of future rate moves. As shown, markets are nearly fully pricing in 50 basis points of monetary easing by next spring.

Pre-Jobs Swaps Market

Post-Jobs Swaps Market

Bessent has floated the idea of taking regulatory authority away from the Fed:

Bessent wrote in the Wall Street Journal that the central bank has veered away from what he described as its core mission of promoting full employment, stable prices and moderate long-term interest rates.

President Donald Trump’s top economic official is doubling down on an idea he has trumpeted for months: The Fed has overstepped its bounds by taking on banking regulation, and that must stop.

“The Fed now regulates, lends to and sets the profitability calculus for the banks it oversees, an unavoidable conflict that blurs accountability and jeopardizes independence,” Bessent wrote. “There must also be an honest, independent, nonpartisan review of the entire institution, including monetary policy, regulation, communications, staffing and research.”
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Though Powell has been critical of bank supervision and regulation all being under the purview of one member on the Fed’s Board of Governors designated as a vice chair.

“You’ve got a group of seven people on the board, and as appointments change, there’ll be some changes in the approach to regulation,” Powell told lawmakers during a hearing in February. “Putting it all in a single person, admittedly, just to recommend to the board can lead to some volatility … and that’s not great for the institutions we want to regulate.”

Fed Vice Chair for Supervision Michelle Bowman is currently the person at the central bank with that responsibility. Trump elevated her to that post earlier this year, and she has kicked off a comprehensive review of the capital requirements for the nation’s largest banks.

There will be, of course, a political angle to this suggestion, but this idea has been floating around for quite some time. I’ve previously written about it on PrefBlog … somewhere! … and while keeping an open mind am inclined to support the idea of separation of powers, simply on the grounds that a single institution shouldn’t have so much power.

As an example of the debate, I suggest The Supervisory Role of the Central Bank by PIERRE DUQUESNE:

It is quite naturally assumed nowadays that responsibility for monetary policy devolves upon the central bank. The question of who should be responsible for banking supervision, however, is much more controversial despite the historical backdrop concerning institutional responsibility. As Paul Volcker, former chairman of the Federal Reserve System, pointed out on the occasion of the one hundredth anniversary of the Banca d’ltalia, some central banks, like those of the United States and Italy, were “founded much more out of concern about banking stability than out of ideas about monetary policy as we know it today.”
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The controversy over the role of the central bank centers on a basic question: is it preferable, for the effectiveness of monetary policy and banking supervision, that the institutions responsible for monetary policy and banking supervision be independent or come under the same joint authority, even be one and the same institution? The many different systems in existence reflect the history of individual institutions and the particular circumstances in each country. Neither economic theory nor an analysis of the institutional arrangements suggests that one particular model is objectively more effective than all others.

If one looks at the special features of the French system and compares them with the general principles underlying other countries’ arrangements, the wide range of possible approaches becomes apparent. But the French system seems to mix the advantages of having a banking supervisory function closely related to the central bank with those of it having a legal independent status. A further model (the planned European System of Central Banks, or ESCB) will add another element to this already complex picture.

Theoretical Issues in Banking Supervision
Theoretical analysis does not suggest that one institutional model for banking supervision is superior to all others.

And Miran proceeded along the confirmation process:

But Democrats questioned Miran’s ability to distance himself from Trump, should he be confirmed to become a Fed governor. Miran said Thursday he plans to technically remain an employee of the White House if he becomes Fed governor on a temporary basis.

He told lawmakers he would take a leave of absence from his current role as chair of the Council of Economic Advisers if his Fed term lasts only through January, but said he would resign if he remains for longer. He said he was advised to take that approach by legal counsel.

“You are going to be technically an employee of the President of United States, but an independent member of the board of the Federal Reserve. That’s ridiculous,” Democratic Sen. Jack Reed of Rhode Island said.
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Before doing a complete 180 on his views about Fed independence, Miran, a Harvard-trained PhD economist, had challenged it in the recent past.

Last year, Miran co-authored a Manhattan Institute report that called the Fed’s independence an outdated “shibboleth,” and he called for shorter terms for Fed governors to give the president more power to hold sway over the agency.

The paper also criticized the revolving door of leaders between the White House and the Fed. Some senators characterized Miran’s nomination as ironic.

Sen. Tina Smith of Minnesota said “given the nature of your current role and your expressed concern in mind for insulating the Fed board members from the day-to-day political process, I just don’t understand how your nomination doesn’t break the rule or the goal that you’ve set out yourself.”

In response, Miran said his paper simply laid out proposals to reform the Fed and that “it’s important that we have democratic oversight.”
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In response to a question posed by Sen. Andy Kim of New Jersey, Miran said he hasn’t been asked by Trump or anyone in the administration to vote for lower interest rates if he’s confirmed.

Sen. Elizabeth Warren of Massachusetts, the committee’s Democratic ranking member, also criticized Miran for coming “from a highly political role to a non-political role.” At one point, she pressed him to state that Trump lost the 2020 election, which he refused to state outright.

Miran is also one of the main architects of Trump’s aggressive trade policy. In a November 2024 paper, Miran detailed how a tariff-centric approach, aimed at weakening the dollar, could reshape the global trading system in favor of the United States. But if confirmed to be a Fed governor, Miran would no longer play a role in shaping the administration’s fiscal and trade policy.

Today, let’s have a special shout-out for LCS.PR.A! This issue was down 5.33% today … I guess that somebody noticed that it pays $0.70 p.a. and is set to mature 2029-4-27 at par. It almost certainly won’t actually mature, of course, it will just be extended at a new dividend rate – but you can’t really count on a 2029-4-27 price of more than about 10.25 or so, depending on how well the managers gauge the market. So it closed yesterday at 12.20, meaning that it had an expected capital loss slightly in excess of three years dividends, and only has a term of a little over 3.5 years. The close today was 11.55 … but even at a bid of 11.05, the yield to maturity ($10.00) is only 4.02%.

Drives me nuts. I can’t stand it. But nobody ever listens to me.

Hats off, again, to the medical profession!

As national medical, scientific, public health and patient organizations, we call for the resignation of HHS Secretary Robert F. Kennedy Jr. to ensure the health of the American people.

Forcing high-level CDC expert leaders to turn their back on decades of sound science to meet Kennedy’s agenda puts us all at risk. This final exclamation point on a term defined by repeated efforts to undermine science and public health definitively leaves Americans less safe in a multitude of ways:
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We are gravely concerned that American people will needlessly suffer and die as a result of policies that turn away from sound interventions. After careful consideration, we insist on Kennedy’s resignation to restore the integrity, credibility and science-driven mission of HHS and all its agencies. Our country needs leadership that will promote open, honest dialogue, not disregard decades of lifesaving science, spread misinformation, reverse medical progress and decimate programs that keep us safe. We are speaking out because protecting public health is our responsibility as physicians, scientists and patient advocates. It is also the responsibility of our elected officials, and we call for their support at this critical moment to protect the health of the nation. It is time to reverse course and begin rebuilding the public health infrastructure overseen by CDC. Kennedy has proven himself unwilling and ill-prepared to lead that effort.

Thank you,  

Infectious Diseases Society of America 
[20 other signatory organizations]

This follows the IDSA’s commentary on the Monarez firing and consequent resignations discussed August 28:

The mass resignations of CDC expert leaders present a clear and present danger to Americans of all ages and leave our nation extremely vulnerable to a wide range of public health threats from outbreaks to bioterror attacks. As we near respiratory virus season, it is imperative that our country have expert public health leadership for effective surveillance, communications and responses.

This loss of highly experienced CDC leadership is the latest devastating result of the Administration’s sustained attacks on public health, and it absolutely must be the last. It is time for fundamental changes and a return to evidence-based policy. The Administration’s current trajectory for destroying the public health system is reckless and cannot continue.

The organizations have more backbone than an entire caucus of Republicans.

Meanwhile, the non-surreal world braces for tomorrow’s jobs number:

New metrics released Thursday showed that first-time claims for unemployment benefits rose to an 11-week high; that private-sector businesses sharply reined in their hiring last month; and that last month was the worst August for layoff announcements since the pandemic and, before that, the Great Recession.
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The latest data tees up an August jobs report that, when released Friday morning, is expected to show another month of tepid job gains. Economists have forecast that the economy added 80,000 jobs last month, which would be a slight increase from the slower-than-expected 73,000 net gain in July.

I’ve added a note about the Business Development Bank to yesterday’s post about OSFI.

PerpetualDiscounts now yield 5.68%, equivalent to 7.38% interest at the standard conversion factor of 1.3x. Long corporates yield 5.10%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 230bp, a slight (and perhaps spurious) narrowing from the 235bp reported August 27.

The Institute for Supply Management (ISM) survey came out today:

U.S. manufacturing contracted for a sixth straight month in August as factories dealt with the fallout from the Trump administration’s import tariffs, with some manufacturers describing the current business environment as “much worse than the Great Recession.”

The Institute for Supply Management (ISM) survey on Tuesday also showed some manufacturers complaining that the sweeping import duties were making it difficult to manufacture goods in the United States. President Donald Trump has defended his protectionist trade policy, which has raised the nation’s average tariff rate to the highest in a century, as necessary to revive a long-declining U.S. industrial base.

That was reinforced by government data showing spending on the construction of factories dropped in July and was down 6.7 per cent from a year ago. A U.S. appeals court ruled last Friday that most of Trump’s tariffs were illegal, adding more uncertainty for businesses.
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The ISM said its manufacturing PMI edged up to 48.7 last month from 48.0 in July. A PMI reading below 50 indicates contraction in manufacturing, which accounts for 10.2 per cent of the economy. Economists polled by Reuters had forecast the PMI would rise to 49.0.
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Tariffs continued to dominate commentary from manufacturers. Some makers of transportation equipment said conditions were worse than the 2007-09 recession, adding “there is absolutely no activity” and “this is 100 percent attributable to current tariff policy and the uncertainty it has created.” Some viewed the conditions as consistent with “stagflation.”

Some electrical equipment, appliances and components producers complained that “‘made in the USA’ has become even more difficult due to tariffs on many components.” They said the “administration wants manufacturing jobs in the U.S., but we are losing higher-skilled and higher-paying roles.” Others reported that because of the lack of “stability in trade and economics, capital expenditures spending and hiring are frozen.”

Manufacturers of computer and electronic products said “tariffs continue to wreak havoc on planning and scheduling activities,” adding that “plans to bring production back into (the) U.S. are impacted by higher material costs, making it more difficult to justify the return.”

Food, beverage and tobacco products manufacturers warned that everything made of organic sugar was “about to get significantly more expensive” because of a 50 per cent tariff on imports from Brazil and the U.S. Department of Agriculture’s elimination of the specialty sugar quota.

Markets are in a bit of a tizzy:

France’s 30-year government bond yields hit their highest levels in more than 16 years on Tuesday at around 4.5%, while yields on 30-year German bonds hit a fresh 14-year high at about 3.4%. In the UK, 30-year gilt yields notched their highest mark since 1998, as investors looked warily ahead to the government’s autumn budget plans.
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The U.S. 30-year yield was up 5.1 basis points at 4.96%, while benchmark 10-year Treasury yields rose 4.5 bps to 4.27%. Canada’s 10-year yield rose 7 basis points to 3.44%, although that was well within trading ranges of the past month.
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Europe’s broad Stoxx 600 share benchmark was down 1.5%. The S&P 500 was down 0.69%, the Dow Jones industrial average lost 0.55%, and the Nasdaq fell 0.82%.

The S&P/TSX composite index ended up 0.2% at 28,615.62, eclipsing Friday’s record closing high.

Nothing much happened today in the continuing saga of the Lisa Cook – Trump lawsuit:

An emergency court hearing over President Donald Trump’s attempt to fire Federal Reserve Governor Lisa Cook ended with no immediate ruling from the judge overseeing the high-stakes legal battle.

US District Judge Jia Cobb spent more than two hours Friday morning hearing arguments over Cook’s request to keep her job on the prominent board while her legal challenge plays out.
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Cobb has asked for more written arguments to be submitted to her by next Tuesday. It’s possible she rules after then, or takes additional time to sift through how to best proceed with the case. Her options include setting it on an expedited track for a prompt resolution of Cook’s underlying claims.

Though Cobb, an appointee of former President Joe Biden, held off for now on making an initial ruling in the case, she also made clear that she wasn’t prepared to fully buy into arguments pushed by either Cook or Trump.

The judge pushed back on a suggestion by Justice Department attorney Yaakov Roth that federal courts have no authority to second-guess a decision by a president to fire a member of the Federal Reserve “for cause.” But even with that judicial power, Cobb said, there still may be some level of deference by a court to the president’s decision-making.

“Deferential doesn’t mean that there’s no probing of it,” the judge said. “You just assume good faith, you defer.”

But Cobb also appeared sympathetic to arguments pushed by Cook’s lawyer, Abbe Lowell, that Cobb wasn’t given adequate notice of Trump’s reason for removing her, as well as an opportunity to defend herself against the fraud allegations underpinning the president’s decision.

“You’re not suggesting what happened here would satisfy due process requirements?” the judge asked Roth at one point.

“Was anything sent to her directly?” she added, referring to the fact that Trump’s had only posted a letter addressed to Cook announcing her firing on social media. “You still have to serve someone. You have to give them information.”

But Lowell ran into issues with Cobb over his argument that Trump’s decision to lean on the fraud allegations was pretextual since he has been vocal about his desire to install members on the board who are more aligned with him on monetary policy.

“I’m unconformable with the pretext argument,” the judge said at one point.

Canada 25Q2 GDP showed a contraction:

The Canadian economy contracted sharply in the second quarter as trade tensions with the United States hammered exports and weighed on business investment.

Real gross domestic product declined 1.6 per cent at an annualized rate, the first quarterly contraction in nearly two years, Statistics Canada reported on Friday.

The result was in line with the Bank of Canada’s projection but considerably worse than Bay Street analysts were anticipating. A Reuters poll ahead of the data expected a 0.6-per-cent decline.
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The downturn in the second quarter was led by a massive 26.8-per-cent annualized drop in exports as U.S. President Donald Trump’s levies began to bite and tariff front-running in the first quarter went into reverse. Automobile and industrial machinery exports were hit particularly hard. Imports declined 5.1 per cent.

The uncertainty created by the trade war also weighed on business investment, which fell at an annualized pace of 10.1 per cent in the second quarter, the worst result since 2016, outside of the COVID-19 pandemic.

Naturally, there was an effect on the market:

Market-implied odds of a quarter-point rate cut by the Bank of Canada next month shot up in the wake of this morning’s weaker-than-expected GDP reading for the second quarter.
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Money markets were predicting chances of a rate cut on Sept. 17 at close to 40% before the GDP figures were released. They shot up to about 47% after the data were released, implying almost equal odds of whether there will be a rate cut next month or not.

Monthly employment and CPI data will still be released before the Bank of Canada will make its decision on a September rate cut.

The Canadian dollar immediately reacted to the data, falling by two-tenths of a cent to 72.55 cents US. It didn’t take long for it, however, to recover.
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Here’s how implied probabilities of future interest rate moves stood in swaps markets moments [before and] after the 8:30 a.m. data, according to LSEG data. The current overnight rate is 2.75%. While the bank moves in quarter-point increments, credit market implied rates fluctuate more fluidly and are constantly changing. Columns to the right are percentage probabilities of future rate moves.

Pre-Announcement Swaps Market

Post-Announcement Swaps Market

Continuing the Trump-Cook reporting from yesterday, Lisa Cook has filed her lawsuit:

Federal Reserve Governor Lisa Cook is suing to keep her job on the board, which helps set interest rates, after President Donald Trump said he was removing her from her role earlier this week.

Cook’s lawsuit, filed Thursday morning in federal court in Washington, DC, asks for a judge to rule that Trump’s attempt to remove her is unlawful and that she remains an active member of the Federal Reserve.

A hearing on her request for a temporary restraining order has been scheduled for 10 a.m. ET on Friday in front of Judge Jia Cobb, an appointee of former President Joe Biden.

Cook’s lawsuit sets the stage for what could be a high-stakes legal battle with major implications for the Fed and the power of the presidency, even as Trump moves to consolidate his hold over parts of the government once considered sacrosanct and free from political influence.

Now, Lord knows I don’t want to make this a political blog – and get the comment section jammed up with whack-a-doodles – but I really want to mention my admiration for the one group of professionals that has stood up during the tumultuous times: the medical profession.

The American Academy of Pediatrics was the first:

The American Academy of Pediatrics released its updated recommendations for vaccines on Tuesday, including Covid-19 shots for infants and young children – a break from the current US for Centers for Disease Control and Prevention recommendations.

“It differs from recent recommendations of the Advisory Committee on Immunization Practices of the CDC, which was overhauled this year and replaced with individuals who have a history of spreading vaccine misinformation,” the AAP said in a news release.
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Tension between AAP and those driving federal health policy has been running high for months, particularly around changes to the Advisory Committee on Immunization Practices, or ACIP.
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Dr. Sean O’Leary, chair of the AAP Committee on Infectious Diseases, said at the time that AAP liaisons to ACIP did not participate in the meeting “because we view it as illegitimate.”

“What we heard in this meeting was really a false narrative that the current vaccine policies are flawed and that they need fixing,” he said.

On August 22, it was reported that they had company – the American College of Obstetricians and Gynecologists also endorsed a different policy than that of the CDC:

The American College of Obstetricians and Gynecologists on Friday reaffirmed support for Covid-19 vaccination during pregnancy, becoming the second major professional medical association to break from current US Centers for Disease Control and Prevention recommendations this week.

“While the Centers for Disease Control and Prevention (CDC) recently removed its recommendation that pregnant and lactating individuals receive updated COVID-19 vaccines, ACOG’s recommendations have not changed,” according to the updated practice advisory. “The American College of Obstetricians and Gynecologists continues to recommend the use of updated COVID-19 vaccines in individuals contemplating pregnancy and in pregnant, recently pregnant, and lactating individuals.”

Now, four senior people have resigned from the CDC in support of Dr. Susan Monarez who, apparently, refused to follow instructions and fire them and has therefore been fired herself:

Monarez’s ouster, first reported by The Washington Post, burst into public view over several tumultuous hours Wednesday. Just weeks into her tenure as director, she had clashed with HHS Secretary Robert F. Kennedy over vaccine policy and her refusal to fire several veteran CDC leaders, according to people familiar with the situation.
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Monarez’s ouster followed days of internal pressure led by Kennedy’s deputy chief of staff and close confidante, Stefanie Spear, according to two people familiar with the situation. It also came soon after Kennedy summoned Monarez to Washington and demanded that she fire Dr. Debra Houry, the agency’s chief medical officer and deputy director of programs and science; Dr. Demetre Daskalakis, director of the National Center for Immunization and Respiratory Diseases; and Dr. Dan Jernigan, director of the National Center for Emerging and Zoonotic Infectious Diseases, according to two people familiar with the matter.

Monarez refused, angering Kennedy and triggering his move to remove her.

Monarez also clashed with Kennedy and his team over vaccine policies, including an impending announcement that could draw links between immunizations and autism, according to a person familiar with the situation.
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Shortly after Monarez’s departure was confirmed Wednesday, three other top CDC officials also announced that they were leaving. Dr. Debra Houry, the agency’s chief medical officer and deputy director of programs and science; Dr. Demetre Daskalakis, director of the National Center for Immunization and Respiratory Diseases; and Dr. Dan Jernigan, director of the National Center for Emerging and Zoonotic Infectious Diseases, were agency veterans whom staffers said were well-liked and trusted.
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Dr. Jennifer Layden, director of the Office of Public Health Data, Surveillance, and Technology, also left the CDC on Wednesday, according to a source familiar with the situation who asked not to be named because they weren’t authorized to share the information.

I did enjoy reading Dr. Demetre Daskalakis’ letter of resignation, posted on X.com

My resignation letter from CDC.

Dear Dr. Houry,

I am writing to formally resign from my position as Director of the National Center for Immunization and Respiratory Diseases at the Centers for Disease Control and Prevention (CDC), effective August 28, 2025, close of business. I am happy to stay on for two weeks to provide transition, if requested.

This decision has not come easily, as I deeply value the work that the CDC does in safeguarding public health and am proud of my contributions to that critical mission. However, after much contemplation and reflection on recent developments and perspectives brought to light by Secretary Robert F. Kennedy Jr., I find that the views he and his staff have shared challenge my ability to continue in my current role at the agency and in the service of the health of the American people. Enough is enough.

While I hold immense respect for the institution and my colleagues, I believe that it is imperative to align my professional responsibilities to my system of ethics and my understanding of the science of infectious disease, immunology, and my promise to serve the American people. This step is necessary to ensure that I can contribute effectively in a capacity that allows me to remain true to my principles.

I am unable to serve in an environment that treats CDC as a tool to generate policies and materials that do not reflect scientific reality and are designed to hurt rather than to improve the public’s health. The recent change in the adult and children’s immunization schedule threaten the lives of the youngest Americans and pregnant people. The data analyses that supported this decision have never been shared with CDC despite my respectful requests to HHS and other leadership. This lack of meaningful engagement was further compounded by a “frequently asked questions” document written to support the Secretary’s directive that was circulated by HHS without input from CDC subject matter experts and that cited studies that did not support the conclusions that were attributed to these authors. Having worked in local and national public health for years, I have never experienced such radical non-transparency, nor have I seen such unskilled manipulation of data to achieve a political end rather than the good of the American people.

It is untenable to serve in an organization that is not afforded the opportunity to discuss decisions of scientific and public health importance released under the moniker of CDC. The lack of communication by HHS and other CDC political leadership that culminates in social media posts announcing major policy changes without prior notice demonstrate a disregard of normal communication channels and common sense. Having to retrofit analyses and policy actions to match inadequately thought-out announcements in poorly scripted videos or page long X posts should not be how organizations responsible for the health of people should function. Some examples include the announcement of the change in the COVID-19 recommendations for children and pregnant people, the firing of scientists from ACIP by X post and an op-ed rather than direct communication with these valuable experts, the announcement of new ACIP members by X before onboarding and vetting have completed, and the release of term of reference for an ACIP workgroup that ignored all feedback from career staff at CDC.

The recent term of reference for the COVID vaccine work group created by this ACIP puts people of dubious intent and more dubious scientific rigor in charge of recommending vaccine policy to a director hamstrung and sidelined by an authoritarian leader. Their desire to please a political base will result in death and disability of vulnerable children and adults. Their base should be the people they serve not a political voting bloc.

I have always been first to challenge scientific and public health dogma in my career and was excited by the opportunity to do so again. I was optimistic that there would be an opportunity to brief the Secretary about key topics such as measles, avian influenza, and the highly coordinated approach to the respiratory virus season. Such briefings would allow exchange of ideas and a shared path to support the vision of “Making America Healthy Again.” We are seven months into the new administration, and no CDC subject matter expert from my Center has ever briefed the Secretary. I am not sure who the Secretary is listening to, but it is quite certainly not to us. Unvetted and conflicted outside organizations seem to be the sources HHS use over the gold standard science of CDC and other reputable sources. At a hearing, Secretary Kennedy said that Americans should not take medical advice from him. To the contrary, an appropriately briefed and inquisitive Secretary should be a source of health information for the people he serves. As it stands now, I must agree with him, that he should not be considered a source of accurate information.

The intentional eroding of trust in low-risk vaccines favoring natural infection and unproven remedies will bring us to a pre-vaccine era where only the strong will survive and many if not all will suffer. I believe in nutrition and exercise. I believe in making our food supply healthier, and I also believe in using vaccines to prevent death and disability. Eugenics plays prominently in the rhetoric being generated and is derivative of a legacy that good medicine and science should continue to shun.

The recent shooting at CDC is not why I am resigning. My grandfather, who I am named after, stood up to fascist forces in Greece and lost his life doing so. I am resigning to make him and his legacy proud. I am resigning because of the cowardice of a leader that cannot admit that HIS and his minions’ words over decades created an environment where violence like this can occur. I reject his and his colleagues’ thoughts and prayers, and advise they direct those to people that they have not actively harmed.

For decades, I have been a trusted voice for the LGBTQ community when it comes to critical health topics. I must also cite the recklessness of the administration in their efforts to erase transgender populations, cease critical domestic and international HIV programming, and terminate key research to support equity as part of my decision.

Public health is not merely about the health of the individual, but it is about the health of the community, the nation, the world. The nation’s health security is at risk and is in the hands of people focusing on ideological self-interest.

I want to express my heartfelt gratitude for the opportunities for growth, learning, and collaboration that I have been afforded during my time at the CDC. It has been a privilege to work alongside such dedicated professionals who are committed to improving the health and well-being of communities across the nation even when under attack from within both physically and psychologically.

Thank you once again for the support and guidance I have received from you and previous CDC leadership throughout my tenure. I wish the CDC continued success in its vital mission and that HHS reverse its dangerous course to dismantle public health as a practice and as an institution. If they continue the current path, they risk our personal well-being and the security of the United States.

Sincerely,

Demetre C. Daskalakis MD MPH (he/his/him)
7:14 PM · Aug 27, 2025

A man of integrity, pulling no punches!

The problem is: Trump wins anyway. Assuming that the plan is to destroy confidence in American instutitions (presuming that this is in order to make life for oligarchs a little freer from regulation and annoying facts) then duelling recommendations is a great place to start. How many people in the world are really qualified to make a sober choice between the Ob/Gyn’s recommendations ad the CDC’s? Not many. But we all have to choose anyway which means we can all create our own little bubbles of trusted authorities, picking and choosing according to factors that are not particularly germane to the actual science.

Gaining respect and building a superb team is hard. Losing respect and breaking up a superb team is easy.

To continue the Trump-Cook reporting from yesterday … Janet Yellen has weighed in:

Former Federal Reserve Chair and Treasury Secretary Janet Yellen slammed President Trump on Wednesday for moving to fire Fed board of governors member Lisa Cook, calling his actions “unlawful” and “dangerous.”

“US President Donald Trump’s claim that he has ‘fired’ Federal Reserve governor Lisa Cook ‘for cause’ is not only unlawful. It is profoundly dangerous,” she wrote in an opinion piece in the Financial Times.
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Yellen defended Cook in her article, saying she has done her job “with integrity.”

She also said Trump’s attempt to fire her was motivated by “intimidation.”

“By targeting Cook, Trump is sending a chilling message to every member of the Federal Reserve board and to the regional reserve bank presidents who take part in the Federal Open Market Committee: express disagreement with the president’s views and you are next,” she wrote.

Yellen also said that Trump’s move against Cook undermines the independence of the Fed, presents long-term inflation risks and lowers the value of the dollar.

She cited instances of political capture of the monetary authority in different countries, including Germany, Hungary, Argentina and Turkey.

“The names change, but the story is the same,” she wrote.

As Assiduous Reader niagara points out in a comment, the US curve has steepened considerably since Trump took office, which is consistent with the market resisting a potential premature or overdone monetary easing.

PerpetualDiscounts now yield 5.69%, equivalent to 7.40% interest at the standard conversion factor of 1.3x. Long corporates continue to yield 5.03%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now 235bp, a slight (and perhaps spurious) narrowing from the 240bp reported August 20.