Trump's relentless critique of Powell raises market concerns
Donald Trump is once again exerting pressure on the head of the US central bank. He has been criticising Jerome Powell since his second term in the White House began. In the past, Trump has referred to him as a "fool" and "a big loser." Now, the president has written that "he will probably blow it again."
"The consensus of almost everybody is that, "the Fed should cut rates sooner, rather than later". Too Late Powell, a man legendary for being Too Late, will probably blow it again - But who knows???" wrote Donald Trump on his platform, Truth Social, on Saturday.
The post referred to Jerome Powell, the chairman of the Federal Reserve, which is the central bank of the USA. This is not the first time Trump has made such remarks about Powell. Previous statements have led to market turmoil, the sale of US stocks and bonds, as well as a decline in the dollar's rate, which was dubbed the "sell America" trend.
At the beginning of May, the US president called the Fed chair "a fool who has no idea" what he is doing. He accused Powell of lacking competence and claimed he does not understand the current economic situation.
Earlier, Trump described Powell as "a big loser" and even suggested the possibility of removing him from office before the end of his term, which expires in 2026. Ultimately, he retracted this after a negative market reaction.
Experts: Premature rate cut could trigger a new wave of inflation
The Federal Reserve is regarded as one of the world's most influential financial institutions. However, if the Fed were to lose credibility, it would also lose its ability to influence markets. This could happen if, due to Donald Trump's pressure, it becomes dependent on the executive branch.
Economic experts highlight that a premature interest rate cut could trigger a new wave of inflation. A particularly dangerous scenario would be one where low economic growth combines with high inflation, creating the phenomenon of stagflation. This is a situation central bankers strive to avoid because it limits their ability to address both problems simultaneously.
