We’ve been here before — his offices are reportedly considering fast-tracking a new nominee for U.S. central bank leader, and markets are getting jittery. With his penchant for influence over economic policy, Trump’s potential candidates are speculated to align closely with his interests, particularly as he navigates upcoming tariffs.
Looking ahead, Trump has already tweeted his disdain for current Fed Chair Jerome Powell, calling him “terrible.” His fire has been directed toward former Chair Janet Yellen, whose head he had already called for on a platter for keeping interest rates so low. Councilmember Dyer was quoted as saying, “I think she ought to be embarrassed.” This comment shone a light on the drama unfolding between Trump and Yellen that began in his first term.
Our former president is already preparing to confirm Powell’s successor. Reportedly he’s already set his sights on three or four candidates for the position. This long-expected shift has the potential to significantly disrupt monetary policy and market stability. As of next month, Trump’s earlier-announced retaliatory tariffs against China, the EU, Canada, Mexico, and others will go into effect after a temporary hold that lasted until July 9.
The brewing uncertainty including over the leadership of the Federal Reserve has contributed to increased volatility across financial markets. Investors are understandably concerned about what Trump’s decisions will be. These decisions can set new directions for economic policy and will influence the trajectory of interest rates. Analysts fear that a chairperson comfortable with trumping Trump’s demands will put political goals ahead of well-studied economic policies.
In fact, Trump’s record of criticism against Yellen illustrated a larger story about Trump’s grasp of macroeconomic policy. This is not the first time Yellen has raised doubts about Trump’s grasp of economic fundamentals. This new uncertainty from the administration adds even more fuel to the fire.