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In an interview with CNBC on Tuesday, United States (US) President Donald Trump said he will soon announce his pick for Federal Reserve (Fed) Governor Adriana Kugler’s seat and possibly name his nominee for Fed chair. Trump further noted that Treasury Secretary Scott Bessent will not be considered as Chair Jerome Powell’s replacement because Bessent wants to remain in his current position.
“There are numerous people that are qualified, I am going to be announcing that very shortly,” Trump said and added:
“A lot of people say, when you do that, why don’t you just pick the person who is going to head up the Fed? That’s a possibility too.”
When asked about the latest progress in trade negotiations, Trump noted that they are getting very close to making a deal with China. He also explained that they will be announcing tariffs on semiconductors and chips in the “next week or so.”
Finally, the President reiterated that he will raise the tariff rate on Indian imports substantially. “They’re fuelling the war machine, and if they’re going to do that, then I’m not going to be happy,” Trump told CNBC.
Market reaction
Major equity indexes stay under modest bearish pressure following Wall Street’s opening bell. At the time of press, the S&P 500 Index was down 0.25% on the day, while the Dow Jones Industrial Average was losing 0.3%. In the meantime, the US Dollar Index stayt in positive territory at around 99.00.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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