The US currency showed a decline against major world currencies in Asian trading on Thursday. The reason was reports that Donald Trump is considering the possibility of an early announcement of his candidacy for the post of chairman of the US Federal Reserve System. The decision may be announced as early as September or October.
Sources familiar with the matter said that Trump is dissatisfied with the actions of the current head of the Federal Reserve Jerome Powell, in particular his refusal to quickly reduce the key rate. Among the possible successors of Powell are the current member of the Fed Board of Governors, Kevin Warsh, and the director of the National Economic Council, Kevin Hassett.
The market reacted to the news with a decline in the dollar. According to Rodrigo Catril, a strategist at National Australia Bank, a potential early nomination will increase political pressure on the Fed. "It is likely that the country will face a situation where we will have a shadow head of the Federal Reserve even before the expiration of Powell's term in May next year," the analyst said. He also added that the expected increase in pressure on Powell to cut rates increases the pressure on the dollar from investors.
Trump once again expressed sharp criticism of the Fed, emphasizing that maintaining high rates keeps the cost of borrowing for the federal budget at an excessive level. During a recent speech, he said that he was considering "three or four" candidates for the post of head of the regulator. The final decision is expected to be announced in the coming weeks.
Jerome Powell, who was reappointed for a second term in 2022, officially expires in May 2026. However, the possible early designation of its successor may affect the regulator's policy as early as this year, given the growing political and market sensitivity to the Fed's actions amid continuing inflationary uncertainty.
