Tonight, Federal Reserve Chairman Powell will deliver an important speech, but the focus has long shifted from 'bank regulation' to - the direct conflict between him and Trump!
The cause of the issue is that the Federal Reserve's headquarters renovation budget surged from $1.9 billion to $2.5 billion. Trump was furious, questioning 'whether there is something behind the scenes,' and even suggesting he might fire Powell!
Although Powell responded that the overspending was mainly due to clearing toxic substances, aging facility upgrades, and a general rise in construction costs, and denied that 'the renovation includes high-end restaurants,' insisting that the entire process complies with regulatory requirements. However, Trump and the Republicans are relentlessly pursuing: the Treasury Secretary will intervene to review, and some members of Congress have even submitted this matter for investigation by the Justice Department!
The two major uncertainties tonight are affecting global markets:
① Will Powell fight back?
He is unlikely to name names directly, but he is expected to make a strong statement: the independence of the Federal Reserve is inviolable!
This is not only a warning to Trump, but also a baseline defense to preserve the reputation of the central bank.
② Will Trump take drastic measures?
On the surface, he says 'no fraud, no firing of Powell,' but based on his consistent style, a flip could happen at any time! The previous disagreements over interest rate cuts have already accumulated a lot of tension, and this time he might not let it go easily with an excuse.
A greater hidden danger is approaching:
Once the independence of the central bank is torn apart by political interference, history has already given painful lessons:
In the past, many economies blindly flooded money under the operation of a 'submissive central bank,' resulting in either runaway inflation or financial collapse. Now, the deepening yield curve inversion in the U.S. has already made market sentiment tense.
If Powell is removed and replaced by a new chairman who 'takes political orders' and sharply lowers interest rates, inflation could soar, and our wallets and global assets might suffer!
Tonight is not just a routine speech, but an ultimate game of finance and politics.
Can Powell withstand the pressure and defend the 'golden brand'?
Or, as Twitter is hotly discussing, is a 'resignation speech' really on the horizon?
The answer is about to be revealed, and the whole world is watching.
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