Trump’s Criticism of Jerome Powell
Donald Trump has once again publicly criticized Fed Chairman Jerome Powell harshly and even called for his dismissal because Powell has not lowered interest rates as Trump desired. Trump accuses Powell of reacting too slowly and holds him responsible for a waning momentum in the US economy.
The Stance of the Federal Reserve
However, Powell and the Federal Reserve are sticking to their restrictive monetary policy as inflation remains above the target rate of 2 percent. The Fed last kept the key interest rate at 4.5 percent after having previously raised it to as high as 5.5 percent to combat inflation.
Legal Situation and Market Reactions
Trump’s threat of dismissing Powell is hardly enforceable legally without just cause and is seen by experts as an attack on the independence of the US central bank. These interventions have already triggered significant uncertainty in the financial markets: The S&P 500 fell by 2.4 percent on Monday, and the Nasdaq dropped by 2.5 percent; technology stocks such as Tesla suffered heavy losses. The volatility index VIX also rose significantly — a sign of increased market fear. The US dollar came under pressure in favor of safe assets like gold.
Opportunities and Risks for Investors
This situation means a phase of increased uncertainty and volatility for investors due to political interventions in monetary policy decisions. At the same time, some investors see the sell-off as an opportunity to enter or add to their positions in anticipation of a possible later recovery.
In summary:
- Trump publicly demands interest rate cuts and threatens Powell with dismissal due to his hesitant monetary policy.
- The Fed remains committed to combating inflation despite Trump’s pressure.
- Trump’s attacks shake confidence in the independence of the central bank.
- This leads to significant losses in the stock markets and increased volatility.
- For investors, this presents both risks and opportunities in the current market environment.
These developments are of great importance for investors, as political influences on monetary policy institutions can have fundamental effects on market developments.