Trump's policies accused for insufficient interest rate reductions by Federal Reserve Chair Powell
In a notable turn of events, the relationship between US President Donald Trump and Federal Reserve Chair Jerome Powell has been marked by tension, particularly regarding interest rates. Trump has repeatedly criticised Powell for maintaining relatively high interest rates, which he argues are harming the US economy by increasing borrowing costs and limiting growth.
For months, Trump has urged Powell to lower rates significantly, claiming the Fed's policies are costing the US "a fortune" and accusing Powell of acting "too late" in adjusting rates. This public feud reached new heights when Trump openly insulted Powell, calling him "not a smart person" ahead of key interest rate decisions. Trump also considered replacing Powell and has mentioned having several potential successors in mind, though Powell’s position remains secure legally due to the Fed's independence.
The strained relationship between Trump and Powell has had a significant impact on various markets. In terms of interest rates, Powell and the Federal Reserve have generally resisted Trump’s calls to cut rates aggressively. Powell has suggested holding rates steady to manage inflation risks, despite political pressure to loosen monetary policy.
This resistance to lower rates has indirectly affected the crypto markets, particularly Bitcoin. Higher interest rates tend to increase the opportunity cost of holding non-yielding assets like Bitcoin, which can suppress crypto prices. Conversely, expectations of rate cuts or looser monetary policy often fuel Bitcoin rallies as investors seek alternatives to traditional assets. Given Powell's cautious stance against lowering rates and Trump's push for cuts, this push-pull contributes to volatility in crypto markets.
In a recent development, Powell expressed support for pending stablecoin legislation in Congress, indicating a shift in his views on crypto. However, his support for regulation does not necessarily imply an endorsement of the underlying value proposition of the industry. Powell's comments on Tuesday appear to have left Bitcoin mostly unaffected, with the price down 1.3% in the last 24 hours, to $105,859 at writing.
The regulatory framework for stablecoins is currently under consideration in Congress. If stablecoins are to be used, a federal and state level regulatory framework is needed, according to Powell. He also stated that he expects to see more crypto-related activity over time.
Powell's comments on crypto have often sounded more like an acknowledgement of the industry's political and economic ascendance than a full-throated endorsement of its underlying value proposition. This shift in Powell's views on crypto reflects the changing status of the industry.
Despite the ongoing tensions, it is clear that the relationship between Trump and Powell has significant implications for the US economy, interest rates, and financial markets, including cryptocurrencies. As the situation continues to evolve, it will be interesting to see how these factors continue to interplay.
[1] https://www.cnbc.com/2019/12/11/trump-says-fed-is-the-only-problem-with-the-us-economy.html [2] https://www.reuters.com/article/us-usa-trade-fed/trump-says-fed-chair-powell-is-a-stubborn-mule-idUSKBN1Y52Y6 [3] https://www.cnbc.com/2019/12/11/trump-calls-fed-chair-powell-not-a-smart-person.html
- In the world of cryptocurrency, Trump's tussle with Federal Reserve Chair Jerome Powell over interest rates has indirectly affected Bitcoin and other digital assets.
- Higher interest rates, advocated by Powell despite political pressure to loosen monetary policy, can increase the opportunity cost of holding non-yielding assets like Bitcoin, potentially suppressing crypto prices.
- Interestingly, Powell has recently expressed support for pending stablecoin legislation in Congress, indicating a potential shift in his views on the crypto industry.
- Powell's comments on stablecoins suggest a need for a federal and state level regulatory framework, showing a more cautious approach to endorsing the underlying value proposition of the crypto industry.
- Amidst this, President Trump's push for lower rates and Powell's resistance continue to create volatility in the crypto markets.
- The ongoing relationship between Trump and Powell holds significant implications for the US economy, financial markets, and even the broader policy-and-legislation landscape, particularly in the general-news domain of politics and crypto exchanges.
