SINGAPORE, Jan 12 (Reuters) – Tension between the White House and the U.S. central bank sharply escalated over the weekend, with U.S. Federal Reserve Chair saying the administration had threatened him with a criminal indictment related to the Fed headquarters renovation.
Chair Powell called the threats a “pretext” aimed at putting pressure on the Fed to cut interest rates. The U.S. dollar fell broadly, U.S. stock futures slid and Treasury futures rallied.
Here are what investors and market analysts are saying about the rift:
VISHNU VARATHAN, HEAD OF MACRO RESEARCH, ASIA EX-JAPAN, MIZUHO, SINGAPORE
“The Fed independence question is now well and alive and maybe subject to re-evaluation every few meetings.
“I think I’m still not sure how sustained and adversarial the attack on the Fed might be. There could be a scenario where Trump could still appoint someone with some credibility and allow this person to run the show – so that’s probably why markets aren’t panicking as yet.”
ANDREW LILLEY, CHIEF RATES STRATEGIST AT BARRENJOEY, SYDNEY
“Trump is pulling at the loose threads of central bank independence. I don’t even believe that he expects that Chair Powell will be charged… The only reason that he’s taking these steps is that he knows that he’s not going to take control of the Fed, so he wants to exert as much undue pressure as he can.
“It is not good. Don’t get me wrong, but I think it will amount to nothing. Investors won’t be happy about it, but it shows actually Trump has no other levers to pull. The cash rate will stay what the majority of the FOMC wants them to be.”
(Reporting by Tom Westbrook and Gregor Stuart Hunter in Singapore and Michelle Price in New York; Editing by Muralikumar Anantharaman)
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