Foreseeable, Trump immediately proved it again on Thursday. In his post on the Truth Society, he said that the Fed should have lowered interest rates, “Powell’s termination cannot be swift!”
Let’s start with Powell defending the Fed’s independence. “Our independence is a legal issue,” Powell said at the Chicago Economic Club. Supreme Court Chief Justice John Roberts allowed Trump to continue firing senior officials to other agencies – some believe that the case is more sensitive to the market in the case of whether Trump can fire or leave Demote Powell. He said he believes the case does not apply to the Fed and he will never succumb to external forces.
“We’re never going to be affected by any political pressure,” Powell said. “People can say anything they want, and that’s good. It’s not a problem. But we’re going to do our things strictly without thinking about politics or any other irrelevant factors.”
Powell stayed calm and avoided the name Trump in a conversation with former Indian Reserve Bank governor Raghuram Rajan. But his bluntness is a clear departure for central bankers, who essentially avoided commenting on White House policy and turned around when he was attacked by Trump in public. His remarks came as concerns about the independence of the Federal Reserve began to spread rapidly into market discourse. They come, too, as Trump’s trade policy threatens to put central banks in an impossible position – essentially trying to take risks of their stable prices and labor market requirements at the same time.
Powell has not stated the ever-changing tariff plan, which could make our duty to import the highest in a century, depending on which day of the week you decide to run the numbers. He said that without a recovery in the future, businesses and investors may retreat. “If the United States becomes a jurisdiction, i.e., a structurally increasingly high risk, that will make us less attractive as a jurisdiction,” he said. “At the moment we don’t know that, but I think it will be the effect.” In another perspective, he is worried that cutting scientific research may have an impact on economic growth, productivity, health, all kinds of things. [the policy] “It is likely to get us out of our targets. As the economy may be likely, unemployment may increase, and as the tariffs are found, inflation may increase, and some parts of these tariffs start to be paid by the public. That’s very likely.”
