Things Are Only Getting Tougher For Chair Jerome Powell And His 'all Over The Place' Fed

Life isn't getting any easier for Federal Reserve Chairman Jerome Powell.

The central bank chief, fresh off a year of intense criticism from President Donald Trump and a sharp rebuke from financial markets, now faces a landscape full of mines that could detonate in any direction.

Consider:

• Far from easing up now that the Fed has indicated no more rate hikes are coming this year, the White House just accelerated the pressure. Top Trump economic advisor Larry Kudlow said Friday that Powell and his cohorts on the Federal Open Market Committee now should be cutting interest rates, by as much as half a percentage point.
• There could be a dissenting voice on the way. Trump has indicated that he intends to nominate economic commentator Stephen Moore to the Fed Board of Governors. In an essay in late 2018, Moore suggested Powell should resign, though he recently walked back the comment.
• Other cracks could be forming at the Fed. Vice Chairman Randal Quarles said Friday in New York that a rate hike, not a cut, is likely ahead if the economy improves the way he expects.

"I do feel sorry for Chair Powell," Mohamed El-Erian, chief economic advisor at Allianz, told CNBC's "Squawk Box" in a Monday interview. "Not only does he have to navigate this divergence of growth, and it's a pretty tricky balance to strike, but he has to do so with an FOMC that's all over the place."

Powell indeed has had a rough go of it so far.

The Fed raised its benchmark interest rate four times in 2018, earning him Trump's scorn, even as the market remained patient. That patience expired in October, though, when the chair's comments sparked a belief that the Fed was ignoring some troubling signs in financial markets that were pointing to a downturn. More difficulties came in December when Powell implied that the Fed was not considering ending a program of reducing the bond holdings on its balance sheet.

The new year, though, brought some more tranquil moments.

Starting in January, the FOMC took a dovish turn in which it said it was considering winding down the balance sheet reduction and would be "patient" in raising rates. In March, the committee went full-circle, indicating that two projected rate hikes had been knocked down to zero and the balance sheet reduction would end in September.

Markets have rallied, but it's brought little peace to Powell, who continues to find himself under pressure with more White House heat and the prospect of a divided group of policymakers he will have to manage.

"The Fed solidified its U-turn on March 20, hoping to get off the stage, not to be in the spotlight. What do we find now? A massive tug-of-war," El-Erian said. "On the one hand, the White House is pressing for a 50 basis point cut. Not only do they say 'cut,' but they specify how much you should cut. On the other, Fed officials are saying not only are we unlikely to cut this year, but hikes aren't off the table, and you don't want that to develop."

Powell himself sounded adamant at his March news conference that it would take a lot for him to push for rate hikes. While he and others have voiced confidence in the U.S., they worry about developments overseas spilling over domestically and taking the momentum out of an economy that in 2018 saw some of its fastest growth since the financial crisis.