Trump Increases Pressure on the Fed.
Donald Trump’s constant attacks on the Federal Reserve risk backfiring. Politicians could become stubborn, trying to avoid criticism, and delay rate cuts. This, in turn, threatens to weaken the dollar.
One of the key themes of Trump’s second term has been his dissatisfaction with Jerome Powell’s policies and high interest rates. Trump believes they are hindering the economy, raising borrowing costs, and depriving Americans of the ability to buy homes.
This isn’t just talk. The White House has taken the unprecedented step of demanding the resignation of Federal Reserve Chair Lisa Cook through the Supreme Court. This would be the first time such a move has occurred since the Federal Reserve was founded in 1913.
According to Lloyds Bank analysts, such attacks will intensify as the end of Powell’s term approaches. Already, new board member Stephen Miran is demanding an aggressive rate cut of half a percentage point.
Trump has openly stated that he would like to see the rate around 1%, although it is currently close to 4%. His argument is simple: expensive loans are hurting the wallets of ordinary Americans and are slowing economic growth.
Risks for the Dollar
If the Fed delays its decision too long and then abruptly cuts the rate, markets will perceive it as a signal of panic. Such a reaction could increase volatility in financial markets, including the cryptocurrency market.
Currently, the dollar index has fallen almost 10% year-over-year and is holding at 97.64. Meanwhile, Bitcoin has gained 24%, reaching $115,600. This dynamic looks favorable for dollar-denominated assets, including gold.
