President Donald Trump talked about a meeting with the House Republican, which agreed that Fed Chair Jerome Powell should be fired.
According to JP Morgan Research Note, President Donald Trump’s Efforts to cut interest rates on the Federal Reserve can lead to the risk of reducing the freedom of the central bank, leading to the risk of inflation or politically affected monetary policy mistakes.
Trump has repeatedly urged the central bank to cut interest rates as three percent marks to promote the economy and reduce the cost of serving the US over 36 trillion dollars. He has suggested on several occasions that he may try to set the Federal Reserve Chair on fire. Zerome polyOnly to retreat and repeat his calls for low rates.
This week, Trump admitted that he discussed Powell’s potentially firing at a meeting with the House Republican, but told reporters that he would not think he would proceed with that plan.
JP Morgan’s chief American economist Michael Feroli wrote in a note on Wednesday that “an immediate crisis may have passed, although we suspect that we have been completely with this saga” regarding Powell’s possible removal.
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JP Morgan said that the independence of the central bank can be reduced by the President Trump’s efforts to cut interest rates to cut interest rates to Fed Chair Powell. (Getty Image / Photo Illustration / Getty Image)
Feroli said that there is a ban on the removal of a member of the federal law federal Reserve Except for the “reason for”, the board which is generally considered to cover examples of duty malfunction or humiliation, unlike the level of interest rate.
“The reason for which is being discussed is the cost overran on the renewal of the main building of Fed in Washington, DC. It is difficult to know where it can go because an independent agency does not show much historical examples to determine the boundaries of ‘for’ due to the removal of the director of an independent agency,” Feroli wrote.
recently Supreme Court The President allowed the removal of a member of the National Labor Relations Board, who had “for the reason” for security, by ruling in the case of Trump vs. Wilcox. However, the ruling referred to Fed as a separate case and distinguished it as a “specific, semi-private unit”, which can protect central bank governors from AT-wil termination.
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President Trump appointed Powell as a fed chair in 2017, although he has repeatedly criticized him for years. (Through Saul Loaib / AFP Getty Image / Getty Image)
Efforts to remove Pavel or remove him from his role as the chairman of the Fede Financial market trust In American monetary policy, if it becomes more sensitive to political influence.
Feroli explained that economists “generally believe that it is beneficial to remove monetary policy from the political cycle” because “the short time of the election calendar can try to stimulate the economy otherwise politically oriented monetary policy makers, when it is unfair from a long -lasting view.”
For example, low interest rates can increase and increase economic activity Inflationary pressure In the economy, so when inflation is elevated or rates may be cut on growth, further price may increase.
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Fed Chair Powell has faced questions on the Central Bank’s headquarters renewal project. (Photo by Olivier Dauli / AFP through Getty Image / Getty Image)
Economic research around the world has found that central banks are more successful in promoting stable prices and low inflation when they have more political freedom, while the US track records occur as a result of high inflation during the conflict between the President and the central bank, Ferly said.
“International evidence indicates that central banks have more political freedom, which promotes less, more stable inflation. Close to the house, historical records suggest that political intervention contributed to poor monetary policy with adverse consequences with adverse consequences for development of inflation, in the late 60s and early 70s.
In the current context, Ferroli said that reducing the freedom of the Fed may increase interest rates with high inflation risk. American national debt Is responsible for those risks, which will increase the fiscal challenges of the US.
