Trump's crusade against the Fed turning US into an emerging market
renewed his attack on the head of the world's most important central bank, accusing Powell of costing the country 'a fortune' by refusing to reduce borrowing costs more aggressively.
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As far as Trump is concerned, there is 'no inflation' in the United States. In his note to Powell, scribbled over a table of interest rates in 44 countries, Trump said the Fed's policy rate should be among the lowest in the world, putting America in a group of nations that includes Switzerland and Thailand, where borrowing costs currently stand at zero and 1.75 per cent, respectively.
Never mind that both of these countries are currently experiencing deflation. That is compared with an annual inflation rate last month of 2.7 per cent in the US, slightly higher than in May amid signs higher trade tariffs are
starting to push up prices
Trump does not care about the intricacies of data points. His only concern is that the Fed loosens monetary policy as quickly and as sharply as possible to help stimulate growth and lower debt-servicing costs. While the president has
denied he intends to fire Powell, whose term as Fed chair expires in May 2026, he is doing his utmost to hound him out of office in one of the fiercest attacks on the independence of the US central bank.
Financial markets have largely given Trump a free pass since he returned to the White House. With the exception of a brief period of
intense selling pressure in bond and equity markets in early April following Trump's announcement of sweeping 'reciprocal' tariffs on nearly all US trading partners – the sell-off gave way to a dramatic rally after
Trump suspended the levies – investors have downplayed the damage wrought by Trump's assault on domestic and international institutions and norms.
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While many analysts point to
the Taco trade – an investment strategy based on expectations that 'Trump always chickens out', especially when it comes to tariffs – the reality is that markets have never really challenged Trump. The S&P 500 equity index stands at a record high while the yield on the 10-year Treasury bond is at 4.5 per cent, down from 4.8 per cent just before Trump began his second term.
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