Well, the June inflation numbers came in and CPI inflation was -.01%. That comes on the heels of the May report which showed CPI inflation at 0%.

The Fed's case for maintaining ...

the discount rate ...

... at 5.5% is long gone. What to do?

Most pundits are saying that Powell will begin, with baby steps, to push it down at the Fed's September 17-18 meeting. I think that's exactly wrong. The baby step (signal) should take place two weeks from now at the July 31 meeting.

Why? I think the politics and economics align for a July move.

Waiting until mid-September will maximally enrage Republicans who will lambaste Powell for engaging in politics even if he is not. Waiting until the November meeting, two days after the election, will enrage Democrats and solidify the politicization of the Fed in their eyes.

In my view, Powell should do the deed this month, and signal that the policy framework is now easing back toward a rate consistent with inflation expectations in the 2% range. The Fed will take some heat no matter what it does, but the Fed's independence hinges on not seeming political. Since one can make an economic case for July or September, I would opt for July to minimize political damage.