Korean media: Seeking to control the Federal Reserve caused market turbulence: Is Trump becoming the "Commander-in-Chief of Planned Economy"?
US President Trump stated that he would dismiss Federal Reserve (Fed) board member Lisa Cook, a move that triggered severe fluctuations in global financial markets. As concerns about the neutrality and credibility of the Fed's monetary policy have increased, worries continue to grow.
On the 26th local time, President Trump said at a cabinet meeting, "We are looking for a very outstanding person to replace Lisa Cook as a board member." Cook was the first Black woman appointed by former President Biden. The day before, President Trump mentioned on his social media platform "Truth Social" that Cook was under investigation by the housing finance department for alleged mortgage fraud and unilaterally informed her of her dismissal. Cook's lawyer responded that "we will file an appeal against the dismissal and complete the term as required." However, Trump clearly stated that he would start looking for a successor that same day.
This is the first time a US president has publicly expressed the intention to dismiss a Federal Reserve board member. The Fed issued a statement refuting this, saying, "Ensuring the term of the board members and protecting them from dismissal is an important mechanism in monetary policy."
Due to concerns that Trump's actions might undermine the independence of the Fed, the U.S. Treasury market experienced volatility. The yield on the 2-year Treasury note, which is most affected by policy rates, fell 0.04 percentage points to 3.69%. In contrast, the 30-year Treasury note yield rose to 4.94%, reaching its highest level since the first announcement of mutual tariff increases in April this year. The spread between the 30-year and 2-year Treasury yields expanded to more than 1.2 percentage points, reaching the highest level in three and a half years. Although the Fed may lower interest rates under pressure from Trump, the market generally believes that such a trend of rate cuts will not last long due to the impact of inflation (rising prices).
Compared to the previous day, the dollar index fell 0.2%, while gold, a safe-haven asset, rose 0.4%. The Financial Times (FT) analyzed that "a crack in trust in the U.S. financial market has led to a decline in the value of the dollar." The New York Times (NYT) warned that "like boiling a frog slowly, we should be more concerned about irreversible shocks that may occur at some point rather than the current market reaction."
For several months, Trump has been increasing pressure on the Fed. He has publicly asked Fed Chair Powell to reduce the current interest rate range of 4.25%-4.5% by up to three percentage points, arguing that the tariff policy could lead to rising prices and economic slowdown, so it is necessary to cut interest rates.
Some analysts believe that in the long run, Trump aims to completely control the Fed. After Adriana Kugler resigned, if Cook is also dismissed, Trump will have the authority to appoint two new members to the seven-member Fed board. Adding Christopher Waller, whom Trump nominated in 2020, and the successor to Powell, who will finish his term next year, more than half of the seats on the Fed board will be occupied by people appointed by Trump.
Trump is also increasing his intervention in the overall economy and industries. Halfway through his demand for Intel's CEO to resign, the U.S. government agreed to convert the originally allocated $8.9 billion (about 12.4360 trillion won) subsidy for Intel into a 9.9% equity stake. Kevin Hassett, a member of the White House National Economic Council (NEC), told CNBC, "Investment can also be added to other industries besides semiconductors."
The Financial Times (FT) pointed out, "Trump has become the 'Commander-in-Chief of Planned Economy,' completely shattering the Republican Party's free-market ideology."
Source: JoongAng Daily
Original: www.toutiao.com/article/1841667246079051/
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