In a new episode of his already tense relationship with the head of the United States Federal Reserve (FED), President Donald Trump lasted hard against Jerome Powell, whom he described as “stubborn fool” for refusing to reduce interest rates. The criticism, launched through the Truthsocial Network, even included a call to the Board of Governors of the Central Bank to intervene if Powell continues to resist lowering the cost of money.
“Jerome ‘Tardón’ Powell, a stubborn fool, must substantially lower interest rates, now! If you continue to refuse, the Board of Directors should assume control and do what everyone knows what should be done,” the president wrote in his profile.
Trump’s onslaught comes just after the Fed decided, at the fifth consecutive meeting, keep interest rates in the range of 4.25% to 4.50%despite the deceleration signs in some sectors of the US economy. The Federal Reserve left open the possibility of a rate reduction in September, but without compromising a specific action.
An unprecedented political pressure
Although it is not the first time that Trump publicly criticizes Powell, his words mark an increasingly aggressive tone than questions the independence of monetary policy in the US In his previous mandate, the current president had already expressed his frustration with the action of the central banker, but now, back in the White House, the confrontation scale to another level.
Trump’s request to the Board of Governors to take control if Powell does not lower the rates tension the institutional principles that govern the Federal Reserve. The Board, composed of seven members with 14 -year -old staggered mandates, is nominated by the US president himself but It has legal autonomy to make technical decisions without interference from the Executive Power. Even so, Trump’s attempt to politicize his actions does not go unnoticed for markets or analysts.
“This type of declarations affects the credibility of the Fed, generates noise in the markets and can have consequences on investment decisions, both in the United States and in emerging countries,” an Argentine economist based in New York told this medium.
The Fed remains cautious, but does not rule out a decline
In his usual conference after the FOMC meeting, Powell was cautious: he acknowledged that no decision on September was still made and that the committee needs more information about the performance of the labor market and the evolution of inflation. “This is a period between meetings in which we will obtain two complete employment and inflation readings before the September meeting,” he explained.
For markets, this attitude of the Fed reflects a policy of Wait and seein a context in which inflation has yielded, but some salary pressures persist. In this context, the Trump government presses so that financial costs fall as soon as possible, with the aim of underpinning growth and strengthening its political position for the second part of the year.
Impact on Argentina: Why does this fight import?
Although it may seem a strictly American issue, The fight between Trump and the Federal Reserve has direct consequences in emerging economies such as Argentina. If the Fed keeps rates high, capitals tend to stay in the United States, making it difficult to arrive in investments to the region and more expensive external financing. On the contrary, a low rate could relieve pressure on the dollar globally and give some respite to countries with financial fragility.
At a time when Argentina continues to fight to contain inflation, stabilize its exchange market and access new credits, Fed decisions condition the maneuvering margin of the local economic team. To this is added the possibility that greater institutional noise in the US, product of Trump’s political pressure, generates volatility in international markets.
Source: Ambito
