The Federal Reserve has taken action, and this time it's aimed at 'Trump'.
Just last night, before the opening of the U.S. stock market, Chicago Fed President Goolsbee appeared on CNBC, a channel everyone knows, which is quite influential and has been used by the White House in the past to send urgent messages to the market.
He said that the Federal Reserve is 'going up against' Trump, and there are several points to support this:
First, Trump was mentioned directly. Powell usually tells his subordinates not to comment on Trump's policies too much. But Goolsbee this time said that the Federal Reserve is still pondering Trump’s tariff plan, wondering if it will keep inflation rising. Tariffs on intermediate goods, retaliatory actions from other countries, and these factors might require the Federal Reserve to intervene. He also asked, if tariffs on intermediate goods are imposed, how much will costs rise for consumers? How much can consumers bear? This is a crucial question.
Second, it suggests that interest rate cuts will take longer (Trump wants cuts to happen quickly). Goolsbee also said that the Federal Reserve needs more time to clarify the impact of Trump’s trade actions.
Third, he chose to speak right before the U.S. stock market opened, and what he said was not good news—this is how the Federal Reserve shows the market how frightening it is when 'policies change at a whim'. As soon as Goolsbee finished speaking, the stock market opened down, with the Nasdaq index dropping 1% at the opening. Later, Trump personally stepped in and softened his stance on tariffs, which prevented the stock market from continuing to decline.
Fourth, he borrowed CNBC's platform. Goolsbee openly discussed the impact of Trump’s tariffs on inflation on CNBC (a common mouthpiece for the White House), which is essentially a counterattack against political attempts to interfere with monetary policy. The Federal Reserve is using the opponent's usual tactics to defend its independence. It’s still uncertain who will win or lose in this struggle, but savvy investors have already sensed a brewing storm from Goolsbee’s appearance on CNBC.
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