TS Lombard chief U.S. economist Steve Blitz warned that the Fed faces a “potential dismantling” as a result of the Trump administration’s actions.
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President Trump has issued a flurry of attacks directed at the Fed and Chair Jerome Powell in recent months, pressuring the central bank to lower interest rates. Trump has also attempted to fire Fed Governor Lisa Cook, accusing her of mortgage fraud. In addition, the U.S. Justice Department began a criminal investigation into Cook on Thursday and backed Trump’s efforts to fire her.
“The market has been very calm for now (but) the narrative could turn ugly in the coming months,” abrdn senior research economist Sree Kochugovindan told Reuters.
Fears Grow That Trump Could Damage Fed’s Independence
In a lawsuit against Trump, Cook argued that Trump seeks to fire her in order to gain control of the Fed and lower interest rates. Furthermore, rumors have swirled that Trump may try to change the rules governing the selection and reappointment process of the 12 regional bank presidents.
Changing how regional bank presidents are picked could spook investors and raise doubts about the central bank’s ability to make fair and unbiased monetary policy decisions.
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