President Donald Trump and Federal Reserve Chair Jerome Powell have something of a checkered history, particularly recently, with the latter being reluctant to further cut interest rates despite continued pressure from the president.
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Most recently, Trump has expressed displeasure with Powell for his persistent reluctance to further lower rates.
“I’m not happy with him. I let him know it. … If I want him out, he’ll be out of there real fast, believe me,” Trump said last week while meeting with Italian Prime Minister Giorgia Meloni.
Also last week, Powell remarked at the Economic Club of Chicago that the Fed was taking a more cautious, wait-and-see approach to further reduction of interest rates, indicating that the body would “wait for greater clarity before considering any adjustments to our policy stance.”
Powell also indicated that Trump could not remove him from his post, as the Fed’s “independence is a matter of law.”
But, should Trump actually be successful in evicting Powell from his position, what impact might it have on your finances?
Should Trump insist on Powell’s removal by any means necessary, the already embattled stock market could see further punishment.
As Semafor detailed, investors are already fraught with anxiety over current market conditions, with some viewing the current lows as a buying opportunity, while others are concerned over recessionary fears and hits to their retirement funds and existing investment portfolios.
Given the Fed’s perceived history of independence from the political arena, this move could exacerbate ongoing market turbulence.
“Trump is taking the cudgel to elements of the U.S. institutional framework that have long been seen as free from direct political interference,” said Eswar Prasad, an economist at Cornell University, as cited by Semafor.
“This could have serious long-term ramifications for the value and broad use of the dollar in global markets,” Prasad added.
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If Trump does replace Powell with his preferred replacement, such a deal could come with strings attached related to moderate-to-substantial short-term rate cuts.
And when rates fall, your money is affected. Cash investments, certificates of deposit and savings accounts usually decline in value, but auto loans, home equity loans, adjustable-rate mortgages and short-term bonds may benefit from the move, at least in the near future.
