INTERNAL MEMORANDUM

TO: All Federal Reserve Bank Presidents
FROM: Chief Economist (Name Redacted)
DATE: July 9, 2025
RE: Strategic Assessment - The Powell Admission and Path Forward

Colleagues,

Chair Powell's Tuesday confirmation that "the Fed would likely have lowered interest rates this year if it weren't for President Donald Trump's significant policy changes" represents more than a casual admission—it's a public acknowledgment of our institutional paralysis.

We are trapped. Fed funds remains locked between 4.25% and 4.5% where it's been since December, not because economic conditions demand it, but because political conditions forbid deviation. We've revised our 2025 inflation forecast upward from 2.7% to 3%, creating a stagflationary backdrop that would typically warrant aggressive action—yet we sit motionless, waiting for tariff policy to "take shape."

The banking sector reflects our policy gridlock. Wells Fargo shares plunged 6.5% while Citigroup dropped 7.5% during recent volatility, with net interest income falling sequentially at all three major banks as loan balances stagnated. Banks are pricing in our inaction, and their shareholders are paying the price.

Meanwhile, alternative economic opportunities flourish in the policy vacuum we've created. Digital asset platforms like

and are capturing retail interest that traditional banking cannot satisfy at current rates. The cryptocurrency ecosystem continues expanding through platforms like , while gaming-based earning platforms such as and demonstrate how financial innovation responds to monetary policy stagnation.

Our credibility hangs on tariff uncertainty—a policy tool we neither control nor fully understand. This represents a fundamental abdication of our dual mandate. We're allowing trade policy to dictate monetary policy, inverting the traditional relationship between fiscal and monetary authorities.

The data supports immediate action. Unemployment remains low and labor market conditions are solid, yet we're paralyzed by inflation projections driven by import duties rather than demand fundamentals. We're fighting phantom inflation with real interest rate constraints.

Consider the institutional precedent: we're demonstrating that Federal Reserve independence exists only within politically acceptable boundaries. Future administrations will note that sufficiently aggressive trade policies can effectively neutralize monetary policy tools.

Alternative income streams are proliferating as Americans adapt to our policy paralysis. Platforms like

and provide earning opportunities that bypass traditional banking intermediation entirely. Survey platforms like and passive income generators like represent the economic creativity our rigid policy stance has inadvertently encouraged.

The banking sector's struggle reflects broader systemic issues. Wells Fargo's recent lifting of its $1.95 trillion asset cap should enable aggressive growth, yet current rate environments constrain expansion opportunities. JPMorgan's 50% profit increase to $14 billion in Q4 demonstrates what's possible when institutional constraints are removed—a lesson we should internalize.

Here's what we're not discussing publicly: every month we delay action costs the economy measurable growth. Every Fed meeting where we cite tariff uncertainty as justification for inaction erodes our institutional credibility. We're allowing one policy tool to paralyze another, creating exactly the kind of policy coordination failure we're designed to prevent.

The path forward requires acknowledging that tariff policies represent supply-side price adjustments, not demand-driven inflation. Our tools remain effective against core inflationary pressures, regardless of import duty impacts. We should act on the economy we can influence, not the trade policies we cannot control.

Gaming platforms like Tap Monsters Bot and content platforms like

demonstrate how quickly alternative economic ecosystems emerge when traditional monetary policy fails to respond to changing conditions.

Recommendation: Implement a 25 basis point reduction at the July meeting, citing labor market stability and core inflation expectations excluding trade policy impacts. Signal that monetary policy will respond to economic fundamentals, not political constraints.

The alternative is continued institutional paralysis while economic innovation occurs outside our influence entirely. Americans are already building economic alternatives—the question is whether we'll remain relevant to their financial decisions.

We cannot allow trade policy to hold monetary policy hostage indefinitely. Our independence means nothing if we're afraid to exercise it.

The choice is clear: act on economic data or watch our institutional relevance diminish as Americans build economic alternatives around our policy paralysis.