Investors are confident that the Federal Reserve’s monetary policy is independent of political influence.
Yet President Donald Trump’s criticism of Jerome Powell and his rate increases isn’t making things any easier for the Fed chair as stock prices tumble.
Tumult in equities and tightening financial conditions have altered the course of Fed policy before, most recently in 2016, when the central bank signaled four rate hikes for that year and then only carried out one. For now, the Fed hasn’t suggested that tumbling shares risk altering its tightening plans. However, Trump’s badgering doesn’t create the best optics if officials do want to potentially pause should confidence in the markets and the economic outlook deteriorate markedly.