#TrumpVsPowell

The feud between President Donald Trump and Federal Reserve Chair Jerome Powell is escalating, with Trump pressuring Powell to cut interest rates and Powell pushing back against political interference. Here's what's happening ¹ ²:

- *Trump's Criticism*: Trump has intensified his criticism of Powell, accusing him of hurting the economy by keeping interest rates too high. He even suggested that Powell's "termination cannot come fast enough".

- *Powell's Response*: Powell emphasized the need for "greater clarity" before adjusting rates, highlighting risks tied to Trump's tariff proposals, which could fuel inflation. He also stated that the Fed won't shift course in response to political rhetoric.

- *Fed Independence*: The dispute raises concerns about the Fed's independence, with some analysts warning that a forced removal of Powell could trigger volatility across Treasury and currency markets.

- *Potential Consequences*: If Powell is forced out, it could lead to market selloffs, undermine the Fed's credibility, and introduce a risk premium into Treasurys and the US dollar.

*Key Players' Stances:*

- *Trump*: Wants the Fed to cut interest rates to spur growth and has criticized Powell for not doing so.

- *Powell*: Believes the Fed should make decisions based on data, not political pressure, and has pushed back against Trump's criticism.

- *Other Fed Officials*: New York Fed President John Williams has reinforced Powell's message, stating there's currently no reason to change policy.

*Market Impact:*

- *Volatility*: Traders should prepare for heightened volatility as Fed independence becomes a political flashpoint.

- *Risk Premium*: Markets may begin pricing in governance instability alongside economic fundamentals if the dispute continues.