Trump’s Fed Fight: Economic Risks Mount

The former US president is reigniting his feud with the Federal Reserve, potentially destabilizing America’s economy. This clash over interest rates and monetary policy could trigger financial turmoil, impacting both domestic and global markets.

Powell’s Stand

The core conflict revolves around Donald Trump and current Fed Chair Jerome Powell. Trump, during his initial term, criticized Powell for not aligning with his economic directives. Now, with Trump eyeing a return to power, the conflict has escalated.

“Not permitted under the law.”

—Jerome Powell, Fed Chair

Powell has resisted Trump’s demands to immediately cut interest rates. This defiance has led to public insults from the former president, who has labeled Powell with various derogatory terms. The US national debt stands at around 120% of GDP, a level that could cause a debt crisis (Bureau of Economic Analysis).

Rates, Tariffs and Debt

The former president is pushing for lower rates to boost his approval ratings and address the burgeoning US government debt. The annual interest on the $36 trillion debt now exceeds America’s defense spending. Powell, however, has placed the blame on the President’s tariff policies. Cutting rates could cause an inflation spike.

Market Reactions and Global Implications

The bond market’s unease is palpable, with investors shifting money out of America, causing the dollar to plummet. The primary worry is the Fed’s independence and its capacity to manage monetary policy responsibly. Trump has even suggested he may try to appoint himself to replace Powell.

The showdown goes beyond debt servicing; it involves the credibility of the world’s most powerful financial institution. The outcome of this high-stakes battle could have significant consequences for the American economy and the global financial system.