Trump's Relentless Attacks on Fed May Deepen Policy Lag, Send USD Lower

One of the most controversial features of President Donald Trump’s second term is his relentless criticism of Federal Reserve (Fed) Chair Jerome Powell for maintaining elevated interest rates – a stance Trump argues is unnecessarily costly to the American economy. But this is more than just rhetoric. Trump is aggressively attempting to undermine the Fed’s board, threatening an institution long known for its political independence. Ironically, this very assault risks backfiring, deepening what Trump and others describe as a Fed that is "behind the curve," potentially leading to a deeper sell-off in the U.S. dollar. "Political pressures make it tough to credibly shift to an overtly dovish footing. That leaves policy data driven (thus late) rather than pre-emptive. That's bad for the USD," the market insights team at Lloyds Bank led by Nicholas Kennedy, said in a note to clients on Sept. 18. TRUMP’S ATTACK ON THE FED Last Thursday marked a new chapter in Trump’s campaign against the central bank, as his administration took the unprecedented step of petitioning the U.S. Supreme Court to allow the firing of Federal…