Trump 'Strongly' Disagrees With Ken Griffin On Fed, Slams Central Bank's Neglect Of Money Supply: 'It's Like The Pope Not Believing In Jesus'
News Summary
President Donald Trump has once again publicly criticized the Federal Reserve, labeling it "incompetent" and "too late" in raising rates, and calling for a change in its operations. He suggested the Fed should have hiked rates earlier in 2021 and accused it of neglecting the importance of money supply, equating it to "the Pope not believing in Jesus." Trump also "strongly" disagreed with billionaire and former supporter Ken Griffin, CEO of Citadel LLC, who had criticized Trump's interference with the Fed's independence. Trump retorted that "Incompetence is more important than to defend theoretical independence." Meanwhile, economist Paul Krugman condemned Treasury Secretary Scott Bessent for allegedly attempting to undermine the Fed's independence. Fund manager Ruchir Sharma warned that the Fed's expected rate cut this month, driven by political and economic pressures, could trigger a risky asset bubble, as current financial conditions are too loose for a new easing cycle.
Background
Since Donald Trump's re-election as US President in November 2024, the relationship between his administration and the Federal Reserve has remained a focal point for markets. President Trump has long been a vocal critic of the Fed's monetary policy, notably his public rebukes of Chairman Jerome Powell during his first term. Ken Griffin, CEO of Citadel LLC and a significant GOP donor, supported Trump in the 2024 election but holds traditional conservative views on Fed independence. Treasury Secretary Scott Bessent is part of the Trump administration, while Paul Krugman is a prominent economist and commentator who frequently weighs in on government policy. This backdrop sets the stage for ongoing tension between the executive branch, an independent institution, and market commentators regarding the direction of monetary policy and the Fed's role.
In-Depth AI Insights
What are the underlying motivations for President Trump's continued public attacks on the Federal Reserve, especially post-re-election? - This could be a strategy to cement his populist political narrative, pre-emptively blaming any future economic headwinds on the Fed's "incompetence" and "independence" failures, rather than his administration's policies. - It aims to exert immense pressure on the Fed to adopt more accommodative monetary policies at crucial junctures, such as in 2025, to support his administration's economic objectives, even if it goes against conventional economic principles. - By publicly challenging independent institutions, Trump seeks to demonstrate to his political base his image as an "outsider" and a change-maker, and his willingness to challenge the establishment. How does the public disagreement between Trump and Ken Griffin, a major GOP donor, signal shifts within the Republican establishment regarding economic policy and Fed independence? - The disagreement highlights a growing fracture within the Republican Party between traditional conservative views (emphasizing independent institutions and free markets) and Trump's populist approach (favoring more direct governmental influence and political control over monetary policy). - Griffin's critique likely represents a segment of the GOP establishment's increasing discomfort with the Trump administration's perceived interference with Fed independence, potentially leading to further internal party debates on economic governance principles. - It indicates that even within Trump's support base, there isn't complete unity when it comes to long-respected principles like Fed independence, which could introduce uncertainty into future policymaking. What are the broader investment implications if political pressure increasingly dictates Federal Reserve monetary policy decisions, as warned by Ruchir Sharma? - Increased Market Volatility: Reduced predictability of monetary policy will expose investors to higher uncertainty, making markets more sensitive to political rhetoric and interference, thereby increasing volatility. - Asset Bubble Risk: If the Fed cuts rates prematurely or excessively under political duress, it could lead to an oversupply of liquidity, fostering asset bubbles, particularly in equity and real estate markets, increasing the risk of a market correction in the long term. - Erosion of Institutional Credibility: A weakened independent Fed could erode investor confidence, both domestically and internationally, in the consistency and prudence of US economic policymaking, potentially impacting the dollar's status and the attractiveness of US Treasury assets. - Inflationary Pressures: Disregarding money supply and succumbing to political pressure for loose policies could trigger or exacerbate inflation in the medium term, hurting purchasing power and impacting real returns on fixed-income investments.