If executed correctly and communicated effectively to the markets, Trump may elevate cryptocurrency values.
Despite implementing tariffs that strain the economy while removing immigrants and maximizing employment, Trump dreams of significant gains through the sacrifices of trade partners. However, he has additional ambitions, including changing the Fed Chair.
Potential Fed Chair Shake-Up
Trump expressed strong determination in his recent statements, suggesting that Powell is under political pressure. According to insiders, Trump has been contemplating firing Powell for months. However, this does not necessarily mean he will take action immediately; he could wait until Powell’s term expires next year.
Sources from the Wall Street Journal indicate that during meetings at Trump’s Mar-a-Lago club in Florida, he mentioned considering former Fed Chair Kevin Warsh as a replacement for Powell. Warsh has advised against removing Powell and suggested waiting for the conclusion of his term. Close associates of the President have noted this topic has been under discussion since March.
Today, Trump stated:
“If I want him out, believe me, he will leave very quickly.” – Trump
Despite his assertions, should he attempt to remove Powell, it likely would lead to a Supreme Court challenge, resulting in a complex and prolonged process that could inflict further economic damage.
Cryptocurrency Prices May Surge
Even if Trump cannot dismiss Powell, his pressure could compel the Fed Chair to initiate interest rate cuts, especially if motivated by political reasons. During the 2019 trade war, Trump similarly targeted Powell, accusing him of failing to reduce rates swiftly enough.
Understanding the Fed is challenging. If Trump’s claims about Powell avoiding cuts for political reasons are accurate, he could seek ways to initiate monetary expansion through the Treasury or explore other pressure tactics on Powell.
Regardless, Trump desires rate reductions and is employing various strategies, including threats to remove Powell, to ensure this occurs without delay. Given the Fed’s comments on inflation in 2021 and their delayed actions last year, recent hawkish statements may not warrant serious consideration. Just as no one anticipated such rapid rate increases in 2022, we might witness equally unforeseen rate drops today. As the ECB and others reduce rates, this global trend must be closely monitored alongside consumer spending and inflation data.