Reference News Network September 19 report: Germany's "Handelsblatt" website published an article titled "Powell's Impossible Tightrope Walk: Everything is in Jeopardy" on September 18, the content is as follows:
On the 17th, the Federal Reserve cut interest rates by 25 basis points. For months, US President Trump not only publicly strongly demanded a relaxation of monetary policy (his economic rationale was very short-sighted), but also almost every opportunity he had to personally attack and defame Jerome Powell, the Federal Reserve Chair appointed during his first term.
The unthinkable happened. The economic justification for monetary policy decisions has taken a back seat. Now the most important issue is the politicization of the Federal Reserve, that is, whether the Federal Reserve will be downgraded to a subordinate department of the White House.
There are economic reasons for the rate cut, but whether to further loosen monetary policy requires careful consideration. Recently, the US labor market has clearly cooled down, with the unemployment rate unexpectedly rising to 4.3% in August, which provides a basis for the rate cut.
On the other hand, the impact of punitive tariffs has only gradually reflected in inflation data until now. The inflation rate rose from 2.7% to 2.9% in August, and is expected to exceed 3% again in the coming months. In addition, the tax-cut measures in the "Big and Beautiful Act" will bring significant fiscal stimulus to the US economy next year and push up prices.
The risk of inflation cannot be denied. Then, is the Federal Reserve Chair acting under political pressure? This question is very critical, whether from the perspective of monetary policy or politics, but it is difficult to get a clear answer. Regardless, the Federal Reserve Board avoided Trump's request for a large rate cut.
It is certain that the Federal Reserve has become the stage of an unseemly political farce, directed by Trump. He sent his Council of Economic Advisers Chairman Stephen Miller to serve as a member of the Federal Reserve Board, who also became the only member of the board supporting a large rate cut. Now, this loyal aide who is completely loyal to Trump is involved in the interest rate decisions of the world's most important central bank, which is simply absurd.
The struggle between Trump and Powell over central bank independence is far from over, but it has already cast a shadow over everything. This struggle will determine how far Trump's debt experiment (over $3.6 trillion, equivalent to 120% of GDP) can go, how long people can maintain confidence in the dollar as a reserve currency, and how severe the inflation and losses caused by Trump's crazy trade war will be.
Powell said on the 17th: "We are firmly committed to our independence. Other than that, I really have nothing else to say." He also understands that merely emphasizing this point under pressure is enough to show how serious the situation facing the Federal Reserve is. Moreover, it is still far from being over. If there is any lesson from the first eight months of Trump's second term, it is that underestimating Trump is not only reckless, but also a serious dereliction of duty.
Translation by Zhong Sirui
Original: https://www.toutiao.com/article/7551717461238874665/
Statement: This article represents the views of the author. Please express your opinion by clicking on the [Top/Down] buttons below.