00:00U.S. stocks suffered steep losses as U.S. President Donald Trump ramped up his attacks
00:05on Federal Reserve Chair Jerome Powell. This prompts investors to worry about the central
00:10bank's independence, even as they grapple with the effects of Trump's ongoing erratic trade war.
00:17All three major indexes tumbled, with big losses in the magnificent seven group of
00:23mega-cap growth stocks weighing heaviest on the tech-laden Nasdaq. Trump escalated his
00:29criticism of Powell on Monday, saying the U.S. economy is headed for a slowdown
00:34unless Mr. Too Late, a major loser, lowers interest rates now, in a true social post which raised
00:41concerns over the Fed's autonomy. The Sino-U.S. trade rift deepened after Beijing warned other
00:46countries against striking deals with the United States at China's expense, adding fuel to the
00:52spiralling tariff war between the world's two largest economies.
00:55Now, with U.S. markets buckling under the weight of political interference and economic
01:03uncertainty, the stakes couldn't be higher. What began as volatility triggered by trade
01:09tensions has now morphed into something more systemic, a credibility crisis for the Federal
01:14Reserve, and a confidence test for investors around the globe. Now, as Trump's attacks on
01:19Fed Chair Jerome Powell intensify, calling him names like Mr. Too Late and a major loser,
01:25questions are mounting about the independence of the world's most influential central bank.
01:31Add to that, Beijing's hardening stance on trade diplomacy, and it's clear, we are not just
01:35watching market jitters, we're watching the rules of economic engagement being rewritten.
01:41Now, joining us now for insight and perspective is Dr. Stuart Nixon. He's the Deputy Director of
01:47Research at Ideas. Now, Dr. let's start with the markets. We've seen a sharp sell-off across
01:52U.S. indices, with the S&P 500 down over 12% since the start of the year. What, in your
01:58view, is fueling this volatility? Is it more about Trump's trade and tariff rhetoric, or the
02:04pressure campaign on the Fed?
02:07Yeah, while tariffs are commanding the most attention, market jitters reflect wider uncertainty
02:13from the Trump administration's disruptive and unorthodox approach to economic policymaking
02:18in general. Trump's campaign against Chairman Powell contributes to this uncertainty, providing
02:24a destabilizing force of potentially major consequence. Not only share market losses and
02:30volatility, but U.S. dollar depreciation and U.S. Treasury bond yields and the rises in those
02:37reflect the damage that this uncertainty is doing to investor confidence.
02:40Yeah. So, Trump has now publicly called names towards Jerome Powell, major loser, Mr. Too
02:48Late, for not cutting rates fast enough. How significant is this clash for investors? And
02:53is it undermining confidence in the U.S. Central Bank?
02:58Yeah, hostilities between President Trump and Chairman Powell are jeopardizing long-standing
03:03institutional separation. Trump is not shy in his desire to interfere with the Fed, and the
03:10Fed itself in return is being accused of playing politics. So, in the days between Trump announcing
03:17and pausing his tariffs, U.S. Treasury markets actually came dangerously close to becoming
03:21dysfunctional. Some commentators interpreted the lack of Fed intervention as an episode of
03:27Powell playing politics, or even a game of chicken, if you will, with the Trump administration.
03:33While financial disaster was averted, thankfully, investors are questioning their U.S. asset exposure
03:40amid a rethink of the U.S. as a safe haven economy under this unpredictable administration that Trump
03:47is leading. And also a compromised Fed Reserve, the two go together. That shares and bonds are
03:53retreating together is an unusual and significant development in the global economy that highlights
03:57how uncertain investors are, both about Trump policies and about the Fed's role as a financial
04:03safety net.
04:04Yeah, well, what you raise is there are clearly growing concerns about the independence of the
04:09Fed. Why is central bank independence so crucial? And what could be the long-term consequences
04:14if this perception is eroded?
04:16Yeah, well, Fed independence, by which we mean the Fed is operating separately and not subject
04:25to government orders, is a critical institutional pillar supporting confidence in the U.S. economy
04:30and the functioning of financial markets globally. The Fed exercises monetary policy, it buys and sells
04:37government securities, it's responsible financial system regulation in the U.S., that it operates
04:44without political interference, is important to safeguarding the interests of economic stability
04:50and the U.S. and global peoples. Independent central banks have consistently been found to be
04:58better at exercising monetary policy to support stable long-term economic growth with inflation
05:04contained. Confidence in the U.S. institutions like an independent Fed also underpin the attractiveness
05:11of the U.S. dollar and finance, making it a safe haven for large but low-risk investments.
05:17On your question of perceptions or the actual erosion of Fed independence, if that were to occur,
05:25that would actually require a substantial rethink of how the U.S. economy, its institutions and
05:30governance are understood. Investor confidence in the U.S. could plummet and a global reorganisation
05:36and liquidation of capital is not actually inconceivable. A shock of this magnitude would do both
05:43significant short and long-term damage to the economy, to trust in institutions and the relationship
05:49between markets and politics in the U.S. but also potentially globally. And it bears reminding
05:55that major shocks are particularly harmful to poorer countries, to smaller businesses and to the most
06:01vulnerable households. Yeah. So we would love to speak more about, you know, what's to expect
06:07next. But unfortunately, we'll have to keep on continuing our monitor of the whole situation.
06:14Thank you so much. That was Dr. Stuart Nixon. He is the Deputy Director of Research at Ideas.
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