In the United States, President Donald Trump has exerted intense pressure on Federal Reserve (Fed) Chairman Jerome Powell to reduce interest rates. Trump has publicly referred to Powell as a “moron” for not lowering rates and has called him a “loser,” blaming him for the country’s economic challenges. These criticisms stand in stark contrast to Trump’s statements when he first nominated Powell, describing him as a “wise steward of the economy” and a “man of great experience, talent, and integrity.”

Most recently, Trump ordered the removal of Fed Governor Lisa Cook, alleging her involvement in mortgage fraud. This marks the first time in the central bank’s 111-year history that a US president has dismissed a sitting governor. Cook maintains that Trump lacks the legal authority to remove her, but the ongoing attacks on the Fed raises concerns about its independence.

A recent example of how markets react to perceived threats to central bank independence is Turkey. In 2021, the country’s president dismissed the central bank’s governor after he raised interest rates to combat inflation. Following this, the Turkish lira plunged 15%, and inflation accelerated sharply. By late 2022, inflation had surged to over 80%, providing a stark illustration of the consequences when markets perceive a central bank as subject to political influence.

At High Street, we believe that free markets are essential in a shareholder-friendly environment and are a core part of our philosophy. We do not expect the US to experience the same outcome as Turkey. At this stage, we believe Trump’s order will likely be blocked on constitutional grounds, the credibility of the Federal Reserve remains firmly intact, and our outlook on the US is unchanged. We will continue to monitor the situation as things unfold.

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