The conflict between political ambitions and the independence of the Federal Reserve has re-emerged amid President Trump's efforts to dismiss Jerome Powell and Lisa Cook, sparking debates among investors.
Escalation of Political Situation Around the Fed
President Trump’s threats to remove Jerome Powell and Lisa Cook have become a hot topic of debate. However, prediction markets indicate only a 10% chance of Powell being dismissed. This highlights concerns about the president's ability to overcome legal barriers.
Market Reactions to Threats
Financial markets reacted with moderate volatility. Following Trump’s remarks, the US dollar weakened, Treasury yields fell, indicating expectations for looser monetary policy. Meanwhile, gold and the Japanese yen, considered safe-haven assets, rose, signaling that investors are bracing for uncertainty.
Why Fed Independence Matters for Crypto
The issue of Fed autonomy has repercussions throughout the cryptocurrency markets. Political influence over the central bank could redefine inflation expectations, interest rates, and risk appetite. Weakening the Fed could ironically enhance the attractiveness of blockchain, as cryptocurrencies thrive on narratives of decentralization and opposition to centralized authority.
While prediction markets imply that Powell and Cook are safe for now, the conflict between political ambitions and institutional integrity underscores the importance of independence for the stability of financial systems.
