Many investors are fretting about potential post-election risks
It may seem odd to have a central bank boss clinch a rare soft landing of the U.S. economy and then face the sack - but that very real possibility has many investors fretting about potential post-election risks to Federal Reserve independence.
And last month the ex-President insisted again that he would not reappoint the 71-year-old Powell, while complaining that any rate cuts over the coming months would be merely designed to boost the Democrats in an election year. Without mentioning the United States or the Fed specifically, International Monetary Fund chief Kristalina Georgieva said on Thursday that multiple elections around the globe this year was a good moment to underline the importance and the success of central bank independence historically.
“Enacting prudent fiscal policies that keep debt sustainable helps to reduce the risk of ‘fiscal dominance’ — pressure on the central bank to provide low-cost financing to the government, which ultimately stokes inflation.”How much of the debate around post-election Fed risks is already jarring investors is harder to parse.
“A new Fed chair could very well shift the FOMC’s reaction function at the margin,” he added. “But the institutional process is designed to guard against the extreme case of a Fed that is directed by the White House instead of the dual mandate.”
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