Fed Chief Wash Emerges as Strong Leader Despite Trump Ties
U.S. Federal Reserve Chairman Jerome Powell's departure has given his successor, Kevin Wash, more independence from President Donald Trump's influence.
According to the Financial Times (FT), five factors are contributing to this shift in favor of Chairman Wash.
The first factor is Powell's continued presence on the Fed's board. Despite leaving office as chairman, Powell remains a member of the board, allowing him to take the blame for any rate hikes that might upset Trump.
The second factor is the rise in U.S. Treasury yields. This development can help Chairman Wash curb inflation without raising interest rates, giving him more flexibility in his policy decisions.
The third factor is the difference in position between Wash and Treasury Secretary Scott Bessant. While Bessant is struggling to reduce rising interest rates through a bond purchase program, Wash benefits from the increase in government bond rates, which signals an end to the long-term recession.
The fourth factor is the Fed's balance sheet. Trump has shown little interest in the Fed's policy of reducing $19 billion (approximately 25.5 trillion won) worth of long-term securities every month. This lack of attention could make it easier for Wash to continue his austerity measures without interference from Trump.
The final factor is President Trump's declining approval ratings due to the war in Iran and rising oil prices. As a result, investors are less concerned with Trump's or Bessant's remarks, giving Chairman Wash more room to operate independently.