Powell-Trump Federal Reserve Tension Impacts on Global Economy
Bessent Weighs In on Powell’s Future
Treasury Secretary Scott Bessent publicly commented on Bloomberg Television regarding Federal Reserve Chair Jerome Powell’s future, stating Powell should decide whether to serve out his term as Fed Chair through May 2026. He added the caveat that Powell should step down from the Fed Board afterward to avoid market confusion. Powell’s Board term runs until January 2028, and he has not committed to staying.
Ironically, Bessent previously floated the idea of a “shadow chair” last year, which he now uses to justify Federal Reserve Chairman Powell’s full exit. If Fed Chair Jerome Powell leaves in early 2026, coupled with Fed Governor Adriana Kugler’s resignation in August 2025, President Donald Trump would gain two appointments to the Federal Reserves. These appointments will help secure a Trump Administration-loyalist majority on the Fed Board.
This shift underpins expectations for increased rate cuts in 2026, after just one likely cut in 2025, as well as places concerns over Fed independence.
Trump’s Pressure Intensifies on Powell
President Trump has criticized Fed Chairman Powell as “political” for refusing to cut rates, accusing him of trying to help Democrats and calling him a “numbskull.” Trump hinted on social media his desire to fire Powell and install a different Fed Chair that would favor lower interest rates.
ECB Lending Survey Signals Uneven Recovery
In Europe, the ECB’s Bank Lending Survey shows diverging credit dynamics: weak but slightly improving demand from firms, stronger housing loan demand due to a decline in borrowing costs, and modest easing in credit standards despite economic uncertainty. Alternative financing by large firms is growing.
U.S.-Japan Trade Deal and Energy Implications
On trade, the U.S. reached a deal with Japan involving a 15% tariff and $550 billion in Japanese investment, possibly benefiting the long-stalled Alaska LNG project. Energy markets remain steady, with crude prices rangebound and European gas rebounding.
Download our exclusive report to learn more about how the Trump-Powell tension can influence American monetary policy in foreign financial markets and the U.S. economy.
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