Trumponomics Trump May Not Be Done With Powell Yet
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Apr 23, 2025 Krishna Guha, a former New York Federal Reserve executive now at Evercore ISI, and Kate Davidson, managing editor at Bloomberg News, dive into the impact of Donald Trump’s rhetoric on Federal Reserve Chair Jerome Powell. They discuss the potential crisis if Wall Street begins doubting the Fed's independence. Guha warns that confidence in the Fed hinges on its ability to act without political pressure, while Davidson raises questions about Powell's future and the implications of a potential leadership change in the Fed.
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Market Trust Hinges On Fed Independence
- Markets currently trust the Fed to manage tariff-driven inflation despite the trade war.
- If the Fed's independence is questioned, inflation expectations could rise sharply, leading to stagflation risks.
Protect Fed Independence For Results
- Presidents should avoid threatening Fed independence to ensure central bank actions remain credible.
- Preserving Fed autonomy increases the probability of favorable interest rate decisions under economic pressure.
Legal Questions Heighten Fed Risks
- Current presidential attacks on the Fed mark a new level of risk to central bank independence.
- Historically, Fed independence was respected despite criticism, but now legal questions raise the stakes.