Trump escalates feud with Fed chair: Experts warn of inflation risk
Donald Trump is once again putting pressure on the head of the American central bank. He has been criticizing Jerome Powell since the beginning of his second term in the White House. In the past, Trump has called him a "fool" and a "big loser." Now the president writes that "he will probably blow it again."
"The consensus of almost everybody is that, "the Fed should cut rates sooner, rather than later". Too Late Powell, a man legendary for being Too Late, will probably blow it again - But who knows???" wrote Donald Trump on Saturday on his platform, Truth Social.
The post was about Jerome Powell, the chairman of the Federal Reserve, which is the central bank of the USA. This is not the first such comment from Trump about Powell. Earlier statements have led to market turmoil and the sell-off of U.S. stocks and bonds, as well as a decline in the dollar's value, a trend referred to as "sell America."
At the beginning of May, the U.S. president called the head of the Fed a "fool who has no idea" what he's doing. He accused Powell of lacking competence and stated that he does not understand the current economic situation.
Earlier, Trump called Powell a "big loser" and even suggested the possibility of removing him from his position before the end of his term, which ends in 2026. Ultimately, he backed off from this idea after the negative reaction of the markets.
Experts: premature rate cuts could trigger a new wave of inflation
The Federal Reserve is considered one of the most important financial institutions in the world. However, if the Fed lost credibility, it would lose its ability to influence the markets. This could happen if, due to Donald Trump's pressure, it becomes dependent on the executive branch.
Economic experts point out that prematurely lowering interest rates could trigger a new wave of inflation. The situation would be particularly dangerous if low economic growth combined with high inflation, creating a phenomenon known as stagflation. This is a scenario central bankers strive to avoid because it limits their ability to respond to both issues simultaneously.
