Global investors were shaken by US President Donald Trump’s new attack on Fed independence. Trump’s announcement that he had dismissed Fed Governor Lisa Cook surprised markets. This move is seen as a continuation of Trump’s pressure on Fed Chairman Jerome Powell for months.
Experts suggest that this move may be less about protecting the integrity of the Fed and more about Trump’s desire to place his own name on the bank. “Damage to institutional trust” concerns are coming to the forefront.
Market reaction remained limited: Short-term bond yields fell slightly, while the 30-year bond yield rose to 4.936%. S&P 500 futures fell 0.07%, and the dollar index lost 0.1%.
Trump’s increasing influence over the Fed raises questions about the US’s massive $36 trillion national debt and the dollar’s “global privilege”.
As foreign investors accelerate their exit from US markets, the dollar has lost 9% of its value this year. Analysts note that Trump may target other Fed officials in the future. Comments such as, “Markets are currently focused on the expectation of an interest rate cut, but Trump’s statements on the Fed will determine the dollar’s trajectory,” are prominent.
