Investors respond as tensions rise between Trump and the Federal Reserve

Rising Tensions Between the White House and Federal Reserve

On January 12 in 东八区, a significant dispute erupted between the U.S. administration and the Federal Reserve. Over the weekend, Federal Reserve Chair Jerome Powell revealed that the White House had allegedly threatened him with criminal charges connected to the renovation of the Fed’s headquarters.

Powell described these threats as a tactic intended to pressure the central bank into lowering interest rates. In response, the U.S. dollar weakened, stock futures declined, and Treasury futures saw gains.

Market Reactions and Expert Insights

Here’s how financial experts and market participants are interpreting the situation:

Vishnu Varathan, Head of Macro Research (Asia ex-Japan), Mizuho, Singapore

“The issue of the Fed’s independence has become more prominent and may be reconsidered at future meetings. It’s still uncertain how persistent or confrontational these challenges to the Fed will be. There remains a possibility that Trump could appoint a credible figure to lead the central bank, which may explain why markets have not reacted with alarm so far.”

Andrew Lilley, Chief Rates Strategist, Barrenjoey, Sydney

“Trump appears to be undermining the independence of the central bank. I doubt he genuinely expects Chair Powell to face charges. His actions seem designed to apply as much pressure as possible, knowing he cannot directly control the Fed. While this situation is concerning, I believe it will ultimately have little impact. Investors may be uneasy, but it highlights that Trump has limited options. The federal funds rate will remain aligned with the majority view of the FOMC.”

Reporting by Tom Westbrook and Gregor Stuart Hunter in Singapore, and Michelle Price in New York. Edited by Muralikumar Anantharaman.