When President Donald Trump attacked the Federal Reserve this year, Wall Street hardly flinched. However, an impending Supreme Court decision might undermine its confidence. During his second administration, Trump has waged a fierce campaign of pressure on the Fed, regularly calling for interest rate reductions and threatening to oust Chair Jerome Powell. This year, the central bank has reduced interest rates twice, in September and October. It will have another chance in December.
However, based on indicators such as long-term US Treasury interest rates and inflation expectations, investors continue to have faith in the Fed’s ability to combat inflation. Trump’s victory might undermine the Fed’s much-heralded independence in determining interest rates free from political influence.
However, Wall Street appears to think the Supreme Court will ultimately uphold the central bank’s independence. Additionally, markets appear to think that none of the candidates put up to replace Powell as Fed head when his term expires in May represent a threat in that sense.
James Ragan, director of wealth management research at financial services company DA Davidson, stated that Wall Street is currently quite at ease with Fed independence.
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