US President and the Federal Reserve Board: Harmonious Dialogue To Support the Dollar
On Aug. 22, Jerome Powell, chair of the Federal Reserve, announced intentions to “proceed carefully” regarding policy interest rate cuts, suggesting the possibility that at the next Federal Open Market Committee meeting in September, interest rates could decrease.
Powell is being careful about examining the influence of the U.S. government's tariff policies on commodity prices before cutting rates, but President Donald Trump has criticized him as “Mr. Too Late” in lowering rates.
Powell gave a speech at an economic symposium in Wyoming, stating that circumstances “may warrant adjusting our policy stance.” His statement likely suggests a flexible posture that enables a suitable response based on a job market that indicates downside risks.
The market reacted favorably to Powell's remarks, as the Dow Jones Industrial Average hit a new high for the first time in eight and a half months.
Trump responded to Powell's latest statements, calling them “too late.” However, compared to Trump's most recent remarks about possibly being about to dismiss Powell, whose term of office lasts until next May, his tone seems to have softened.
Powell is continuing with his disciplined leadership. Last fall, he decided to lower interest rates, but since the Trump administration announced its tariff policies, he has maintained a cautious posture toward rapid interest rate cuts. On the one hand, a rate reduction could lead to economic stimulus and reduced burden on U.S. Treasury Bond interest payments, but on the other hand, there is a risk that it could accelerate inflation.
Trump, who wants to emphasize favorable conditions, has increased his confrontational approach toward Powell. He has directed Treasury Secretary Scott Bessent to speed up the selection of Powell's successor. When allegations of home mortgage fraud emerged around Lisa Cook, a member of the Federal Reserve Board of Governors appointed by the previous administration of Joe Biden, he demanded her resignation.
There are concerns that this sequence of words and actions could jeopardize the Federal Reserve Board's recognition as an independent monetary guardian, and that it could lead to an increase in selling off the dollar and in long-term interest rates. Trump would be wise to be careful with his words, but we also hope that Powell will engage in a harmonious dialogue with the administration.
The market is aware of the danger that Powell, hoping to avoid the impression of succumbing to coercion, could be overly concerned with maintaining the status quo and end up missing the appropriate moment to lower interest rates. Powell must not neglect to carefully explain his policy aims to both the market and the Trump administration.
Policy measures based on an objective view of economics and prices is indispensable to the central bank and supports the core dollar-based system. Communication skills are also critical for the Federal Reserve chair.
Powell is being careful about examining the influence of the U.S. government's tariff policies on commodity prices before cutting rates, but President Donald Trump has criticized him as “Mr. Too Late” in lowering rates.
Powell gave a speech at an economic symposium in Wyoming, stating that circumstances “may warrant adjusting our policy stance.” His statement likely suggests a flexible posture that enables a suitable response based on a job market that indicates downside risks.
The market reacted favorably to Powell's remarks, as the Dow Jones Industrial Average hit a new high for the first time in eight and a half months.
Trump responded to Powell's latest statements, calling them “too late.” However, compared to Trump's most recent remarks about possibly being about to dismiss Powell, whose term of office lasts until next May, his tone seems to have softened.
Powell is continuing with his disciplined leadership. Last fall, he decided to lower interest rates, but since the Trump administration announced its tariff policies, he has maintained a cautious posture toward rapid interest rate cuts. On the one hand, a rate reduction could lead to economic stimulus and reduced burden on U.S. Treasury Bond interest payments, but on the other hand, there is a risk that it could accelerate inflation.
Trump, who wants to emphasize favorable conditions, has increased his confrontational approach toward Powell. He has directed Treasury Secretary Scott Bessent to speed up the selection of Powell's successor. When allegations of home mortgage fraud emerged around Lisa Cook, a member of the Federal Reserve Board of Governors appointed by the previous administration of Joe Biden, he demanded her resignation.
There are concerns that this sequence of words and actions could jeopardize the Federal Reserve Board's recognition as an independent monetary guardian, and that it could lead to an increase in selling off the dollar and in long-term interest rates. Trump would be wise to be careful with his words, but we also hope that Powell will engage in a harmonious dialogue with the administration.
The market is aware of the danger that Powell, hoping to avoid the impression of succumbing to coercion, could be overly concerned with maintaining the status quo and end up missing the appropriate moment to lower interest rates. Powell must not neglect to carefully explain his policy aims to both the market and the Trump administration.
Policy measures based on an objective view of economics and prices is indispensable to the central bank and supports the core dollar-based system. Communication skills are also critical for the Federal Reserve chair.
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