Yellen Condemns Trump’s Attack on Fed Independence

“Profoundly dangerous” is how former Federal Reserve chair and US Treasury secretary Janet Yellen described President Trump’s attempt too remove fed governor Lisa Cook from her post, writing in an opinion piece for the Financial Times on Wednesday.

the action constitutes a “direct attempt to politicize the Fed, intimidate its leadership and bend monetary policy to the president’s will”, Yellen states. “This action threatens to end the independence of the Federal Reserve – and with it, the credibility of the US’s monetary policy both at home and abroad.”

Markets haven’t reacted with similar intensity.On Tuesday,thirty-year US Treasury yields,which largely reflect assumptions about long-term inflation,rose by three basis points. Ten-year yields tightened. The S&P 500 closed 0.41% higher. The dollar fell by about a quarter of a percent.

Yellen herself acknowledged the apathy, urging the financial community to “raise its voice against a direct assault on the credibility of the dollar itself”.

The Federal Reserve has indicated that Cook’s status remains unchanged unless a court ruling dictates or else. Investors may believe the governor will stay in place and the episode will reinforce, not weaken, the principle of Fed independence. The law requires cause for a governor’s removal.

let’s look at how many bonds every central bank owns, and you tell me which is the most manipulated market

Manish Kabra, General Societe

Could something else be influencing this response? The US central bank’s freedom from executive interference is often considered basic to US markets. But the lack of reaction to Trump’s actions raises questions.