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Business Standard
04-07-2025
- Business
- Business Standard
The Apprentice: Fed chair drama as Donald Trump eyes replacement
US President Donald Trump is reportedly preparing to name the next chair of the Federal Reserve earlier than expected in an effort to undermine incumbent Jerome Powell, who has frustrated him by refusing to cut interest rates. Mr Trump has made no secret of his disdain for Mr Powell, recently describing him as 'an average mentally person' with a 'low IQ for what he does.' But Mr Powell's term does not end until May 2026, and the Supreme Court has ruled that the Fed is the one independent agency whose chair the president cannot fire. Typically, a US president announces a new Fed chair a few months before the incumbent's term ends — just enough time for Senate confirmation hearings and a smooth transition. Naming a successor 10 months early would be highly unusual. So why do it? Mr Trump is apparently planning for his Fed chair-in-waiting to establish a 'shadow' Federal Open Market Committee (FOMC) that would publicly pressure the real FOMC to lower interest rates more aggressively. The idea of a shadow FOMC dates back to economists Karl Brunner and Allan Meltzer, who introduced it in 1973 during the early years of the Great Inflation, when Fed policy was widely criticised for being too expansionary. Brunner and Meltzer were influential academics, but they had no direct influence over policy decisions. By contrast, Mr Trump's plan — first floated by Treasury Secretary Scott Bessent during the 2024 campaign — would place his nominee at the centre of a very public effort to undermine Mr Powell's authority. But analysts who see this as a serious attempt to bully Mr Powell may be missing the point. Monetary policymakers are unlikely to pay more attention to a Trump-picked shadow chair than they do to Mr Trump himself. If anything, the move could prompt the Fed to assert its independence by doubling down on current policies. The real goal appears to be weakening the next chair before they even begin their term by forcing them into a kind of public apprenticeship, giving Mr Trump a preview of their approach to monetary policy and testing their ideological loyalty to his agenda. Moreover, the shadow Fed chair will know that any sign of independent thinking could cause Mr Trump to reprise his famous reality-show catchphrase: 'You're fired.' The Supreme Court may have ruled that the President cannot fire the sitting Fed chair, but nothing prevents him from withdrawing a nomination. That threat alone could pressure the nominee to toe the line. The leading contenders to replace Mr Powell reportedly include former Fed Governor Kevin Warsh, who was a finalist when Mr Trump appointed Mr Powell in 2017, National Economic Council Director Kevin Hassett, and Mr Bessent. Current Fed Governor Christopher Waller, a former academic known for his work on central-bank independence, is also in the mix. Appointed by Mr Trump in 2020, Mr Waller is generally viewed favourably by Republicans. This shortlist includes capable and experienced contenders who could rise to the challenge of sustaining economic growth while curbing inflation. But Fed chairs are not monetary dictators; they must win over the rest of the FOMC or risk being outvoted and heavily scrutinised. Even a strong and independent nominee could be weakened by a prolonged stint as shadow chair. Seen as Mr Trump's lackey, their credibility would be severely damaged, limiting their influence over both the FOMC and financial markets. Let's give credit where credit is due: Mr Trump has devised a fiendishly clever way to rein in the next Fed chair, whom he cannot control — at least in theory. But in doing so, Mr Trump risks shooting both himself and the US economy in the foot. Contrary to popular belief, the Fed does not control all interest rates. It sets only the very short-term policy rate, while longer-term interest rates are largely determined by markets. Those rates reflect expectations about future Fed decisions, and those expectations are based on the assumption that policymakers will work to keep inflation under control. If Mr Trump succeeds in pressuring the Fed to cut interest rates too aggressively, inflation expectations will rise, and so will longer-term interest rates. Given that these rates affect everything from mortgages to car loans, ordinary Americans would feel significant pain. The purpose of an independent central bank focused on price stability— an idea I first proposed 40 years ago— is to maintain low long-term interest rates. That may help explain why reports that Mr Trump is planning to announce the next Fed chair ahead of time caused the dollar to fall sharply. Still, The Apprentice: Fed Chair Edition is sure to make for great television, which may be what Mr Trump cares about most.
Yahoo
03-07-2025
- Business
- Yahoo
At Sintra getaway, central bankers mull threats to their domain
By Francesco Canepa and Balazs Koranyi SINTRA, Portugal (Reuters) -At their annual gathering in the hills of Portugal's Sintra, central bankers this week confronted rising challenges to their control of the global money system, from political attacks on the U.S. Federal Reserve to the rise of stablecoins. Recent editions of the European Central Bank's getaway event have been dominated by worries about high inflation - no surprise after central banks whose core task is price stability were mostly late to react to a surge in prices in 2021-22. But this year's discussions - from choreographed panel debates among central bank chiefs to late-night exchanges at the hotel bar - were centred on more existential threats to the monetary system as we know it. U.S. President Donald Trump's frequent, often personal, attacks on Federal Reserve chair Jerome Powell - and hints about his replacement - were the most obvious example. Any suggestion that the Fed might bow to pressure from the White House to lower borrowing costs would hurt its reputation for independence - for decades a core tenet of central banking seen crucial for keeping policy credible and investors on-side. Two in three reserve managers at central banks polled by UBS Asset Management said in a survey released this week they feared that Federal Reserve independence was at risk. Powell batted away such worries during a panel discussion, saying he and colleagues were focused "100%" on low inflation and full employment "in a completely non-political way". He drew applause from an audience of economists and central bankers, with ECB President Christine Lagarde saying she and her peers would do the same if they were in Powell's shoes. CONFIDENCE DENTED But confidence has already been shaken. Central bankers were openly fretting about a topic that was taboo only a few months ago: will the Fed, even under a Trump-picked chair next year, continue to lend dollars to foreign banks when they are in trouble? Commercial lenders outside the United States have been able to borrow dollars even when they are shut out of financial markets via swap lines between the Fed and some other central banks created during the 2008 global financial crisis. These facilities underpin the $25-trillion market for dollar credit outside the United States and also serve a domestic purpose: by helping to douse financial fires abroad, they effectively prevent them from spreading to Wall Street. The Trump administration's retreat from international coordination has raised some concerns about these lifelines, even though there has been no action so far to suggest they will be cut. Governor Rhee Chang-yong said his Bank of Korea, which unlike the ECB and other major central banks does not have a standing arrangement with the Fed and relies on temporary help when needed, might have to fend for itself in the future. "If there's no global dollars shortage, our understanding is that the Fed cannot extend the swap-line in that case and we have to self-defense ourselves," Rhee said at the conference. His Japanese peer Kazuo Ueda emphasised the importance of regional swap lines, such as the Chiang Mai Initiative of the Association of Southeast Asian Nations (ASEAN), as an additional safety net. One European central banker speaking on condition of anonymity said pooling dollar and gold reserves across countries could also serve as a stopgap, although it was unlikely to be sufficient to plug major shortfalls. These fears fed a broader debate about the dollar losing its status as the world's currency of choice for saving and trading, with a lack of viable alternatives in sight. Seeking to reassure colleagues, Powell said the Fed retained its legal authorities and was "still prepared to use" them. STABLECOINS Stablecoins - crypto tokens pegged to an official currency - were a new entry among Sintra's topics of debate, even keeping some central bankers up late in informal discussions at the conference venue's bar. While some recognised stablecoins' efficiency as a means of exchange, their proliferation in recent years - and especially since Trump threw his weight behind them as a way to extend the dollar's global reach - was seen as alarming by many central bankers. They fear stablecoins may be prone to "runs" if investors suspect the issuing company does not have enough currency to back outstanding tokens, as happened to TerraUSD in 2022. Bank of England Governor Andrew Bailey said stablecoins must show they can "hold their nominal value" if they are to be treated as a legitimate means of exchange. The ECB's Lagarde went as far as saying stablecoins amount to "a privatisation of money", taking the supply of currency away from central bankers and undermining their capacity to conduct monetary policy. Rhee was even more specific, saying stablecoins denominated in South Korean won - one of President Lee Jae Myung's election pledges - could undermine the domestic currency by making it easier to switch to dollars. (Additional reporting by Howard Schneider in Washington, Michael Derby in New York, Leika Kihara in Tokyo and Yoruk Bahceli in London; Editing by Mark John and Catherine Evans) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
03-07-2025
- Business
- Yahoo
At Sintra getaway, central bankers mull threats to their domain
By Francesco Canepa and Balazs Koranyi SINTRA, Portugal (Reuters) -At their annual gathering in the hills of Portugal's Sintra, central bankers this week confronted rising challenges to their control of the global money system, from political attacks on the U.S. Federal Reserve to the rise of stablecoins. Recent editions of the European Central Bank's getaway event have been dominated by worries about high inflation - no surprise after central banks whose core task is price stability were mostly late to react to a surge in prices in 2021-22. But this year's discussions - from choreographed panel debates among central bank chiefs to late-night exchanges at the hotel bar - were centred on more existential threats to the monetary system as we know it. U.S. President Donald Trump's frequent, often personal, attacks on Federal Reserve chair Jerome Powell - and hints about his replacement - were the most obvious example. Any suggestion that the Fed might bow to pressure from the White House to lower borrowing costs would hurt its reputation for independence - for decades a core tenet of central banking seen crucial for keeping policy credible and investors on-side. Two in three reserve managers at central banks polled by UBS Asset Management said in a survey released this week they feared that Federal Reserve independence was at risk. Powell batted away such worries during a panel discussion, saying he and colleagues were focused "100%" on low inflation and full employment "in a completely non-political way". He drew applause from an audience of economists and central bankers, with ECB President Christine Lagarde saying she and her peers would do the same if they were in Powell's shoes. CONFIDENCE DENTED But confidence has already been shaken. Central bankers were openly fretting about a topic that was taboo only a few months ago: will the Fed, even under a Trump-picked chair next year, continue to lend dollars to foreign banks when they are in trouble? Commercial lenders outside the United States have been able to borrow dollars even when they are shut out of financial markets via swap lines between the Fed and some other central banks created during the 2008 global financial crisis. These facilities underpin the $25-trillion market for dollar credit outside the United States and also serve a domestic purpose: by helping to douse financial fires abroad, they effectively prevent them from spreading to Wall Street. The Trump administration's retreat from international coordination has raised some concerns about these lifelines, even though there has been no action so far to suggest they will be cut. Governor Rhee Chang-yong said his Bank of Korea, which unlike the ECB and other major central banks does not have a standing arrangement with the Fed and relies on temporary help when needed, might have to fend for itself in the future. "If there's no global dollars shortage, our understanding is that the Fed cannot extend the swap-line in that case and we have to self-defense ourselves," Rhee said at the conference. His Japanese peer Kazuo Ueda emphasised the importance of regional swap lines, such as the Chiang Mai Initiative of the Association of Southeast Asian Nations (ASEAN), as an additional safety net. One European central banker speaking on condition of anonymity said pooling dollar and gold reserves across countries could also serve as a stopgap, although it was unlikely to be sufficient to plug major shortfalls. These fears fed a broader debate about the dollar losing its status as the world's currency of choice for saving and trading, with a lack of viable alternatives in sight. Seeking to reassure colleagues, Powell said the Fed retained its legal authorities and was "still prepared to use" them. STABLECOINS Stablecoins - crypto tokens pegged to an official currency - were a new entry among Sintra's topics of debate, even keeping some central bankers up late in informal discussions at the conference venue's bar. While some recognised stablecoins' efficiency as a means of exchange, their proliferation in recent years - and especially since Trump threw his weight behind them as a way to extend the dollar's global reach - was seen as alarming by many central bankers. They fear stablecoins may be prone to "runs" if investors suspect the issuing company does not have enough currency to back outstanding tokens, as happened to TerraUSD in 2022. Bank of England Governor Andrew Bailey said stablecoins must show they can "hold their nominal value" if they are to be treated as a legitimate means of exchange. The ECB's Lagarde went as far as saying stablecoins amount to "a privatisation of money", taking the supply of currency away from central bankers and undermining their capacity to conduct monetary policy. Rhee was even more specific, saying stablecoins denominated in South Korean won - one of President Lee Jae Myung's election pledges - could undermine the domestic currency by making it easier to switch to dollars. (Additional reporting by Howard Schneider in Washington, Michael Derby in New York, Leika Kihara in Tokyo and Yoruk Bahceli in London; Editing by Mark John and Catherine Evans) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
10-06-2025
- Politics
- Yahoo
Mark Green announces retirement from Congress before end of term
House Homeland Security Committee Chairman Mark Green, R-Tenn., is departing Capitol Hill early, he announced on Monday. Green said he is leaving Congress for the private sector after the House votes again on President Donald Trump's "big, beautiful bill" in the coming weeks, in a statement first obtained by Fox News Digital. "It is with a heavy heart that I announce my retirement from Congress. Recently, I was offered an opportunity in the private sector that was too exciting to pass up. As a result, today I notified the Speaker and the House of Representatives that I will resign from Congress as soon as the House votes once again on the reconciliation package," Green said. House Gop Targets Another Dem Official Accused Of Blocking Ice Amid Delaney Hall Fallout He called serving Tennessee's 7th Congressional District "the honor of a lifetime." "They asked me to deliver on the conservative values and principles we all hold dear, and I did my level best to do so. Along the way, we passed historic tax cuts, worked with President Trump to secure the border, and defended innocent life. I am extremely proud of my work as Chairman of the Homeland Security Committee, and want to thank my staff, both in my seventh district office, as well as the professional staff on that committee," Green said. Read On The Fox News App Green acknowledged in his statement that he had previously geared up to retire in the last Congress, but reversed course. Meet The Trump-picked Lawmakers Giving Speaker Johnson A Full House Gop Conference "Though I planned to retire at the end of the previous Congress, I stayed to ensure that President Trump's border security measures and priorities make it through Congress," he said. "By overseeing the border security portion of the reconciliation package, I have done that. After that, I will retire, and there will be a special election to replace me." Green is an Army veteran who has served in Congress since 2019. As House Homeland Security Committee chairman, he oversaw Republicans' impeachment of former Biden administration DHS Secretary Alejandro Mayorkas. It's not clear where in the private sector Green will go, but it's a safe bet to assume his House seat will stay in Republican hands. The district voted for President Donald Trump by more than 20 percentage points over former Vice President Kamala Harris last year. Republican leaders are hoping to complete consideration of Trump's massive agenda bill by the Fourth of July or shortly thereafter. The bill passed the House in a narrow 215-214 vote, and it is now being considered by the Senate. If the Senate changes the bill, as expected, the House will have to approve that version before it hits Trump's article source: Mark Green announces retirement from Congress before end of term
Yahoo
06-06-2025
- Automotive
- Yahoo
Mike Johnson says he hopes Trump, Musk 'reconcile' amid ongoing feud
Speaker Mike Johnson, R-La., said he hopes President Donald Trump and Elon Musk "reconcile" after a furious public feud over Republicans' "one big, beautiful bill." "I was with the president in the Oval Office yesterday afternoon as some of this was unfolding, and I can tell you, as he said in his own words, he was just, he was disappointed, and I was surprised by Elon's sudden opposition," Johnson told reporters on Friday. "I believe in redemption. That's part of my worldview, and I think it's good for the party and the country if all that's worked out." Then, without addressing Musk directly, Johnson appeared to chide him for attacking Trump. Meet The Trump-picked Lawmakers Giving Speaker Johnson A Full House Gop Conference "I'll tell you what, do not doubt and do not second guess and don't ever challenge the President of the United States, Donald Trump. He is the leader of the party, he's the most consequential political figure of this generation, in probably the modern era, and he's doing an excellent job for the people," Johnson said. Read On The Fox News App Asked whether he'd spoken to Musk since the tirade, Johnson said earlier Friday morning, "We exchanged texts, but I'm not going to talk about the content of it." Johnson also said Republicans were unfazed by the criticism coming from the tech billionaire often called the richest man in the world. Mike Johnson, Donald Trump Get 'Big, 'Beautiful' Win As Budget Passes House "Members are not shaken at all. We are going to pass this legislation on our deadline, and we're very bullish about it," he said. White House press secretary Karoline Leavitt told Fox News Digital when asked about Johnson's call for unity, "President Trump is focused on making our country great again and passing the One Big Beautiful Bill." Trump told Fox News' Bret Baier in an interview on Friday that he was not interested in speaking with Musk, nor was he worried about Musk's threat to launch a third political party. "Elon's totally lost it," the president said. Musk accused Republicans of not working hard enough to cut federal spending with their budget reconciliation bill, which is aimed at advancing Trump's priorities on tax cuts, immigration, energy, defense and the debt limit. The Tesla CEO called out Trump, Johnson and Senate Majority Leader John Thune, R-S.D., all by name as well. Republicans, for the most part, have closed ranks around Trump and their article source: Mike Johnson says he hopes Trump, Musk 'reconcile' amid ongoing feud
