Written by Carolina Mandel, Matt Trissi and Gertrude Chavez-Widrifus
New York (Reuters) -Renewable invitations to the president of the Federal Reserve of the Federal Reserve Chairman Jerome Powell have pushed investors to protect the governor from the risk of high inflation, as the central bank is more willing to reduce interest rates can boost high prices and make lenders demand higher compensation than bonds.
While the most friendly Federal Reserve Chairman can be mixed to reduce stock rates in the short term, it will be translated into weaker US dollars, increased fluctuation in the treasury market and long -term rates, which means the most expensive borrowing costs for mortgage and corporate bonds.
Since his return to the White House in January, Trump has been repeatedly and repeatedly against the Federal Reserve, led by Powell, for not lowering interest rates, fed the fears that Trump aims to put the federal reserve under his thumb.
Even the CEO of JPMorgan Jimmy Damon on Tuesday warned of the unintended consequences of that, saying that the independence of the central bank was sacred.
Some analysts say that the market participants realize that the independence that swings is eroding, as the moves in financial assets may be ground. One of the most important risks is that investors will sell treasury bonds, and raise interest rates on long -term benefits in the American debt market for short -term securities.
“If the markets believe that the political -treated federal reserve will lead to a reduction in growth stimulating rates regardless of economic consequences, long -term inflation expectations will rise, causing a curve to occur,” said Jay Liebas, chief fixed income expert at Asset Manager Jani Capital Management.
“It is impossible to be confident of the size of this step, but I think it will be large – it may be measured by a percentage of the treasury yield for 30 years, not basic points.”
A minutes away from the Federal Reserve meeting from June 17 to 18, which was released last week, showed little support to reduce the central bank meeting from 29 to 30 July, where most policy makers are still concerned about the inflationary risks that Trump’s import tariff can constitute.
However, Trump said that Powell’s resignation “will be a great thing.” The president, who cannot shoot at the Federal Reserve Chairman, has called for a conflict of monetary policy, and publicly managed him to leave Powell or to reduce prices on multiple occasions this month.
“While the brief revenues can decrease in this scenario at a faster pace than the Federal Reserve price discounts to move forward, it is possible that the long ethnic revenues will re -calibrate the high inflation and the high term based on the corporation of institutional confidence,” said Chib Hyghi, Managing Director of Fixed Income in Promotional Consulting Services.
Bond investors priced the increasing price pressures in the inflation market during the next few years. The tie inflation, as shown in the financial papers protected in the treasury in the United States for a period of five years 2.476 % late on Monday, is the highest level in three months.
In a recent escalation of Powell’s criticism, the White House is investigating the costs of costs in renewing the historical headquarters of the Federal Reserve in Washington.
The interrogation has intensified concerns among the market participants about the risks that the Trump administration will try to launch Powell for the reason, and perhaps the only legal path to do so. The US Treasury revenue for 30 years on Tuesday topped 5 % for the first time since late May, as investors were concerned about the huge financial deficit in the country and evaluated the risk of Powell’s exit from the central bank.
A spokesman for the Federal Reserve referred to the previous Powell data. The Federal Reserve Chairman, who was appointed by Trump during the period of the first president of the White House, said he has no plans to leave his position as head of the US Central Bank before the end of the end period on May 15, 2026. Powell’s seat extends to the Federal Reserve Board of Directors to January 31, 2028.
The White House did not immediately respond to a Reuters request for comment.
“I still see somewhat slim risks, but it is higher than it was a week or two,” said Matt Orton, head of the market strategy at Raymond James. Orton still prefers to diversify away from the cabinet and to gold, as well as both high -quality stocks and arrows for growth. “The risk reward for me in the cabinet is not present.”
On hunting
While the chances of the overthrow or resignation of Powell are seen as low, analysts see some opportunities that Trump can nominate someone for the job early to influence monetary policy through the Federal Reserve Chairman.
US Treasury Secretary Scott Beesen said earlier this month that the Trump administration is now focusing on finding an alternative to the height of this fall.
Morgan Stanley said in note that the risk of a shadow is a less relevant question at this stage.
“Until Powell’s duration ended, though, the most risks of our Federal Reserve’s expectations are our economic expectations … where we remain very modest,” wrote Seth Carpenter, chief global economist in Morgan Stanley.
Although market participants believe that the risk of weakening the independence of the central bank is low, many investors are increasingly integrating this possibility in their governorates.
Jimmy Damon, CEO of JPMorgan, referred to those risks in calling for profits on Tuesday, saying: “The independence of the Federal Reserve Bank is very important, and not only for the current president of the Federal Reserve, which I respect, Jay Powell, but for the next president in the Federal Reserve.”
Damon added: “Play with the federal reserve can be severe consequences, contrary to what he might fully contemplate.”
George Puri, the chief investment strategy for fixed income in allspring, said that the asset manager was specifying a site for the most severe return curves, in line with the environment of discounts in the future prices and the growing budget deficit.
He said: “It seems that the GPS strategy for the most severe return curve during the next months and four lines has a great meaning. It is economically justified, its technician support, then the political scene as well.”
Investors say that if the stocks can get a batch of low rates in the beginning, the pressure from high long -term rates will cast a shadow.
Jack Applein, chief investment official at Cresset Capital, said that American stocks may “be fine, but I think it is likely to continue to accelerate the direction of global investors who move capital away from the United States.”
“As soon as investors wonder about the independence of the Federal Reserve, it becomes a less stable cash environment,” Applein said.
(I participated in the reports of Carolina Mandel, Matt Trissi and Gertrude Chavez-Widrifus; additional reports from Louis Kraoskopf, in New York; edited by Alden Bentley and Paul Simao)
