Trump threatens Powell with dismissal again – Commerzbank
|It came as no surprise that Fed Chair Jay Powell would draw the wrath of the US president with the FOMC's decision to leave interest rates unchanged once again – nor did the increasing rudeness displayed by the US president come as a surprise. On Friday, however, he went a step further and repeated his threat to possibly dismiss Powell from office prematurely after all, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.
It may be hard for Trump to undermine the Fed's independence,
"It should now be clear to everyone that such a move would be a disaster for the US dollar. Any successor to Powell would have to cave in to the governments pressure towards an easier monetary policy as otherwise they would also very quickly find themselves out of a job. Admittedly, what Trump ‘says’ (on social media) is far from what Trump does. But just raising the idea that he could fire Powell is enough to hurt the US dollar."
"USD investors now have to once again grapple with the increased risk that the Fed will lose its independence and the dollar will crash as a result. Even if Powell remains in office, one thing should now be clear: the likelihood that he will be succeeded by a conventional candidate has become significantly lower."
"An important task of the chair is to find consensus within the FOMC. But that does not necessarily mean that his vote carries more weight. I therefore doubt that replacing the Fed Chair alone would lead to a complete reorientation of US monetary policy. To achieve this, Trump would probably have to replace the majority of the Board of Governors. This makes it difficult to undermine the Fed's independence, however, whether this will save the dollar is questionable."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.