Former Fed Chair Jerome Powell Warns That Allowing the President to Dismiss Fed Officials Over Policy Disagreements Would Severely Undermine the Central Bank's Independence and Credibility
Concerns over the Fed's independence are intensifying in market mechanisms, with funds accelerating into gold, dollar safe-haven assets, and long-term government bonds. The dollar exchange rate is under pressure from potential political intervention risks, leading to increased short-term volatility in risk assets.
Source: Public Information
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Jerome Powell has repeatedly emphasized during his tenure that Fed decisions must be independent of short-term political pressures. This warning continues the vigilance of past Fed chairs against political interference, reminiscent of the historical lessons from the Nixon era in the 1970s when political pressure led to uncontrolled inflation.
In terms of capital flow, investors are increasing allocations to gold and defensive assets to hedge against potential monetary policy uncertainty, motivated by a desire to maintain confidence in the Fed's long-term anti-inflation commitment, rather than allowing decisions to be swayed by election cycles.
Similar cases include Trump's public criticisms of Powell during his first term and a historical series of presidents attempting to influence Fed personnel; the current U.S. is in a phase where the political environment again pressures central bank independence.
Essentially, this represents a regulatory change: the governance of the central bank is shifting from a highly independent framework to one with potential political risks. The mechanism is that the dismissal power would break the consensus on "depoliticization," leading to a decline in market trust in the long-term stability of monetary policy, thus forcing capital to concentrate again in hard assets that can hedge against policy uncertainty.
ABAB News · Law of Cognition
The stronger the independence, the longer the credit; the more interference, the greater the volatility.
The day politics controls money, the market will flee first.
An excellent central bank sells predictability, while politicians sell short-term gratification.