In view of Greg Gibbs, Analyst at Amplifying Global FX Capital, there has been little pressure on Powell’s policy direction so far; a policy of gradual rate rises and a steady unwinding of the Fed’s bond asset portfolio.
Key Quotes
“Both these policies were set in place before he took the helm, and there has been no reason, as yet, to alter course.”
“The only pressure has come from some upheaval in a few weaker EM countries. There are some visible risks abroad, but not yet enough to spill over to the USA, or force a big shift in the mindset of FOMC members.”
“Having added asset-purchases to the Fed’s policy tool-kit, it appears that the Fed is fully prepared to use them again. They are no longer considered extraordinary or emergency measures. It is not even clear that the Fed would cut rates to near zero again before re-starting asset purchases.”
“If financial and economic conditions in the USA begin to weaken again. You can only imagine the pressure Trump would place on Powell and the Fed to ease policy.”
“Luckily for Powell, Trump can’t just fire him, but Trump is hardly the type to respect the sanctity of central bank independence. Consider the impact on the TRL recently when Turkish President Erdogan suggested he would take more responsibility for monetary policy if re-elected.”
“Trump is very much in the same mould of a strongman populist leader that is weakening confidence in some EM currencies. And the USA fiscal, debt and current account position is in the same weak state as these EM countries.”
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