The consequences of Trumps war against its own Central Bank

A word shapes the expectations for the start of the year in relation to the world economy: uncertainty. The focus is on the question of whether the trade war between China and the USA escalates, or whether it is coming to an agreement is especially.

at least as important is the significance of the question of how to do it with the monetary policy in the world. More recently, the most important Central Bank, the Federal Reserve the United States was, at least, those, than back to normal. Since the end of 2015, she has raised at least nine times their rates .

in Short The key interest rate. Video: Web video Tamedia

In the Euro area and Switzerland, the Central banks should create their own guidelines, at least by December, unaffected. In Switzerland time is therefore short interest in the positive range again before 2020.

"Crazy

become" Like the last days and weeks now, it is threatening the US to lose monetary policy credibility. For months the President of Donald Trump strong pressure on the Fed Board under Jerome Powell that he himself has used. He calls for an end to the rate increases.

As the Central bankers were previously not impress, did not flinch Trump public insults, such as, for example, that the decision-making body of the Fed is crazy. But just by the Fed's lead of Trumps default not allowed to date to impress, you will provide your legally guaranteed independence Nachachtung.

Powell says Trump have confronted him directly with his criticism. Photo: Pablo Martinez Monsivais (Keystone)

After the last rate hike in December has now increased but the US President the pressure dramatically and looking for Ways in how he could Fed chief Powell dismissed. The reported in various US Newspapers. Trumps environment hastened to assure that this intend to Trump.

Whether or not the President can do this at all, and under what circumstances, will be debated in the US media since then, is also intense. Without further ADO, this is not possible: So the opinion of the experts.

words kindle a course in fireworks

But regardless of this question in a room and create uncertainty. This is also an event of the last week testifies: The year of the US-Economists meeting in Atlanta, as Powell appeared together with its predecessors, Janet Yellen and Ben Bernanke on a Podium, he was asked whether he would vacate his Post if the President would ask. "No" was his short and certain answer to that.

prior to that, he has explained on another question, Donald Trump have confronted him directly with his criticism, and there had been neither a Meeting with him, another one was planned. Such Meetings between the Fed Chairman and the President were in the past, after all, is common, said Powell.

On the same Podium Powell also made statements that were interpreted as Contrary to Trump: The Fed chief said that there is no predetermined course of Fed policy, to be patient, would listen to the messages that send the stock markets, and he was also ready to have the own policy, to flexibly adjust.

At the US stock exchanges, these words have taken care of immediately for a course fireworks. Market observers interpreted this as that the Central Bank sets the current tightening of its monetary policy, as previously anticipated, the interest is not appropriately lifting and, soon, the reduction of the Central Bank balance sheet is exposed.

The US President measures his success on the rise on the stock exchanges.

in December, the Fed has declared-in-chief at his official press conference that the Central Bank will continue with the previously chosen path. This was interpreted that the Fed tightens its monetary policy in any case, if not at the same pace as in the past. In the face of a still thriving American economy and a significant increase in Inflation could also be well justified. The most recent data from the US labour market that were released a few hours before Powell's appearance in Atlanta, confirmed the image.

In the equity markets, this original message was bad. She was one of the reasons for the sharp Price plunge in December. And because the US President measures his success on the rise in the stock markets, he is particularly unhappy with the policy of the Central Bank of his country.

No backing from the policy

Since the financial crisis, very expansionary monetary policy has fuelled the stock markets massively, and thus the inequality is because the largest percentage of shares is still the richest. It was clear that the normalisation of interest rates will trigger after this Golden period in the equity markets, little enthusiasm, and the leaders would put the Fed under pressure. The more important a back cover would be just the policy.

That exactly the opposite is the case, threatened not only the independence of the US Central Bank, but given the importance of its monetary policy for the international capital markets, and monetary conditions, ultimately, the international financial stability.

(editing Tamedia)

Created: 07.01.2019, 18:17 PM