In July 2024, former United States president and Republican presidential candidate Donald · Trump said in an interview with Bloomberg Businessweek that if he wins the election in November this year, he will allow current Federal Reserve Chairman Jerome · Powell to complete his term.
This statement immediately caused an uproar in the financial circle. You must know that the relationship between Trump and Powell can be described as "incompatible". During the Trump administration, he publicly criticized Powell's monetary policy on several occasions, and even threatened to remove him from office at one point. Now, why did the businessman-turned-politician suddenly change his attitude? What kind of political calculations are hidden behind this?
February 2018. At the time, Powell had just taken over as chairman of the Federal Reserve. At that time, Trump had high hopes for the new "central bank governor of United States". However, the good times were short-lived. As the Fed began to raise interest rates, Trump's honeymoon period with Powell came to an abrupt end.
"I think he's a politician." Trump told Fox Business in February that Powell said, "If he lowers interest rates, he might do something good for the Democrats." This remark fully reflects Trump's dissatisfaction and suspicion of Powell.
However, just a few months later, Trump's attitude has taken a 180-degree turn. In an interview with Bloomberg Businessweek, he said: "I'll let him figure things out on his own, especially if I think he's doing the right thing." This statement sent a huge shock to Wall Street and political circles.
So why did Trump make such a big shift?
Let's first understand Powell's term schedule. Powell's term as Fed chair expires in early 2026, but his seat on the Fed Board of Governors will remain until January 31, 2028, under existing rules. This means that even if Trump wins the election in 2024, he will not be able to immediately replace the chairman of the Federal Reserve.
Trump may realize that maintaining the continuity and stability of Fed policy is critical in the current economic situation. After all, the United States economy is facing multiple problems such as high inflation and pressure to raise interest rates. A hasty change of Fed chair could trigger market turmoil that could adversely affect the economy.
More importantly, the statement could be a political ploy by Trump. By showing respect for the Fed's independence, Trump is trying to send a signal to voters and markets that he has learned from past experience and will approach his relationship with the Fed in a more mature and robust manner.
However, this statement by Trump does not mean that he has completely abandoned his influence on Fed policy. In the same interview, Trump also made his economic claims, the so-called "Trump economics": low interest rates, low taxes, high tariffs. This policy mix is clearly at odds with the Fed's current policy orientation.
Trump has said that if elected, he will aggressively extract oil to bring down inflation and wants to bring the corporate tax rate down to a low 15 percent. These propositions will have an impact on the Fed's monetary policy.
At the same time, Powell is constantly adjusting the Fed's policy stance. In a speech at the Economic Club of Washington in the same week as Trump's remarks, Powell said that policymakers would not wait until inflation fell to 2% before cutting interest rates.
Powell's remarks seem to have converged to some extent with Trump's economic propositions. Does this mean that the relationship between the two is easing? Or is Powell preparing for a possible "Trump era"?
In any case, Trump's statement adds new variables to the 2024 United States election. It not only affects market expectations for Fed policy, but also provides a new commentary on Trump's economic policy proposition.
In the coming months, we will be closely monitoring the interaction between Trump and Powell, as well as the direction of Fed policy. This is not only about the future of the United States economy, but will also have a profound impact on global financial markets.
Finally, it is worth mentioning that Trump also revealed in the interview that if elected president, he would consider appointing JPMorgan Chase CEO Jamie · Dimon as Secretary of the Treasury. The possibility of such a personnel arrangement has once again sparked speculation and discussion in the market.
In any case, the outcome of the 2024 United States election will have a significant impact on the global economic landscape. As the world's largest economy and global financial center, the direction of United States' economic policy affects the nerves of global investors.