Financial Association news on August 20 (Editor Zhao Hao) One of the candidates for Federal Reserve Chair, David Zervos, Chief Market Strategist at Jefferies, recently stated that it is inaccurate to describe the central bank as independent; he believes the current chair Powell aligns with the political left.
Zervos said in an interview: 'The Federal Reserve has never been independent, and the political pressure on the Fed has been increasing and continues to increase.' He emphasized that in recent years, Democratic lawmakers have also been pressuring monetary policymakers to lower interest rates.
Zervos also stated that historically, it is not uncommon for Treasury Secretaries and the government to try to influence the Federal Reserve Chair 'behind the scenes.'
According to Xinhua Finance, U.S. Treasury Secretary Scott Bessent acknowledged in an interview last week that there are 10 to 11 candidates being considered for the successor to the Federal Reserve Chair, with Zervos among the new candidates.
Zervos's career began as an economist at the Federal Reserve before he transitioned to Wall Street.
Speaking of the current Federal Reserve Chair Powell, Zervos believes he has indeed 'withstood' many 'crazy' initiatives during the Biden administration, such as opposing increased financial regulation and certain 'woke' policies.
But he also criticized Powell for failing to comment on fiscal debates during a time of surging fiscal spending, saying, 'I don't think he is actually independent. His operational logic comes from a leftist stance—let's put it this way—he is on the anti-Trump side.'
Zervos specifically mentioned in the interview that the Federal Reserve's decision to cut rates by 50 basis points last September occurred less than two months before the election—many in the Republican Party also believe that this move somewhat aided the Democrats.
Zervos also reiterated his view: the ongoing reduction of the Federal Reserve's balance sheet in recent years has made monetary policy more restrictive than many think—this also strengthens the case for rate cuts.
He said: 'The current level of interest rates is actually more restrictive because there is no additional support from the balance sheet. So we do need to bring rates back to a more neutral level.'
Powell and many colleagues believe more time is needed to observe the impact of Trump's tariff increases on inflation. Zervos, however, called these tariffs merely a 'one-time price level shock.'
When discussing the job market, Zervos stated that full employment can be defined as an unemployment rate below 3.5%, far lower than the current 4.2%. According to the dual mandate given to the Federal Reserve by Congress, it needs to achieve both price stability and maximize employment.
