United States (US) President, Donald Trump’s second term has been marked by an aggressive campaign to reshape the US Federal Reserve’s (Fed’s) Federal Open Market Committee (FOMC) and the broader Federal Reserve system.
Driven by a desire to align monetary policy with his economic vision - particularly through drastic interest rate cuts - Trump has launched pointed attacks on key Fed figures, specifically Fed Chair, Jerome Powell and Fed Governor, Lisa Cook. These efforts align with a broader strategy to undermine the Fed’s independence, potentially installing loyalists who prioritise short-term growth over inflation control. Critics warn that such politicisation could erode market confidence, fuel volatility and compromise the institution’s role in safeguarding economic stability.
Trump’s feud with Jerome Powell dates to his first presidency. Trump appointed Powell as Fed Chair in 2017, only to turn on him over insufficiently aggressive rate cuts. Powell has become a frequent target of Trump’s ire on platforms like Truth Social. Trump’s core grievance revolves around interest rates, as he advocates for rates as low as 1% to spur growth and ease the burden of federal debt, which has ballooned under his tariffs and spending policies. In contrast, Powell has held rates steady, citing persistent inflation risks exacerbated by Trump’s trade measures.
In May 2025, Trump lashed out on social media when the Fed opted not to cut rates, labelling Powell a “fool” and “numbskull”. Powell’s warnings about the inflationary impact of Trump’s tariffs further inflamed tensions. In public speeches made a month earlier, Powell explicitly linked these policies to potential price hikes and unemployment, a stance Trump views as direct opposition to his agenda. This has led Trump to portray Powell as an obstacle, using him as a scapegoat for economic setbacks.
Beyond policy clashes, Trump has also seized on ancillary issues to justify Powell’s potential removal as Fed Chair. The $2.5 billion renovation of the Fed’s Washington DC headquarters has been weaponised as “cause” under the Federal Reserve Act, which only permits dismissals for malfeasance. Office of Management and Budget Director, Russell Vought, a Trump ally, criticised alleged luxuries like VIP dining rooms and premium marble. Powell has vehemently denied these claims, insisting the renovations have had rigorous oversight. Trump has even threatened a lawsuit against Powell, escalating rhetoric with personal insults like “loser” and “moron.” Analysts suggest this scapegoating serves a strategic purpose: if the economy falters, blame shifts to Powell, allowing Trump to claim credit for successes while deflecting failures.
Coupled to his attacks on Powell, Trump has also targeted Governor Cook by firing her, in a calculated move to secure a majority on the seven-member Board of Governors. The “cause” was alleged mortgage fraud. Cook rejected the accusation and has pledged a legal fight that could potentially reach the Supreme Court. Cook’s removal allows Trump to appoint a loyalist, tipping the Board’s balance, amplifying his influence over the FOMC.
The FOMC, which sets interest rates and directs monetary policy, comprises the Board of Governors, the New York Fed president and four rotating regional bank presidents. Trump’s strategy extends beyond individual removals to systemic overhaul. With regional presidents’ terms expiring in February 2026, a Trump-aligned Board could veto reappointments of dissenters, replacing them with allies favouring rate cuts. This could decisively shift FOMC voting dynamics, prioritising Trump’s goals over economic factors.
Historically, Trump’s disdain for Fed autonomy is well-documented. During his initial presidency, he criticised Powell for not slashing rates enough and proposed ideas like mandating presidential consultations on rate decisions - a stark break from the Fed’s apolitical tradition. Trump’s allies have drafted plans to curtail independence, subjecting the Fed to executive oversight. However, such reforms would likely face Senate hurdles and legal challenges, but they underscore Trump’s view of the Fed as an extension of White House policy rather than an independent economic guardian.
The implications of these efforts are profound. A politicised FOMC might deliver immediate rate reductions, boosting stock markets and consumer spending - outcomes Trump often touts as victories. However, these actions risk reigniting inflation, creating asset bubbles and diminishing the Fed’s credibility globally. Market reactions have already been jittery. Eroding independence could unsettle investors, raise borrowing costs and weaken the dollar, as seen in past episodes of political interference.
Public and expert sentiment reflect deep divisions. While some echo Trump’s frustration with high rates, viewing Powell as out of touch, others decry interference as a threat to stability. Broader economic concerns, such as tariff-driven inflation, amplify fears that Trump’s meddling could exacerbate instability.
Trump’s assaults on Powell and Cook reflect his intent to remake the FOMC and subvert Fed independence. By leveraging removals, appointments and public pressure, he seeks to mould monetary policy to prioritise growth over prudence. Yet, legal, structural and political constraints may blunt these efforts, preserving the Fed’s role amid uncertainty. The outcome will test the resilience of US financial institutions and shape the economic landscape for years to come. Whether Trump succeeds or not, his campaign signals a pivotal shift in the delicate balance between politics and economics.
The 10-year US Treasury yield fell by more than 10 basis points to close the week at 4.21%. Bond investors focused their attention squarely on Powell’s dovish pivot at Jackson Hole and were largely unfazed by Trump’s removal of Governor Lisa Cook. The US economy surprised analyst expectations, growing at an annualised rate of 3.3% in the second quarter, despite all the tariff-related uncertainty. A robust pick up in business investment, trade and consumer spending contributed to the result. Markets now await this afternoon’s Personal Consumption Expenditure (PCE) Index release, as it is the Fed’s preferred inflation gauge.
Germany’s 10-year Bund yield ended the week at 2.69%, just five basis points lower. Yields reflected a rather uneventful week for the German economy and politics. Today’s economic releases (Retail Sales and CPI) could well awaken the Bunds from their slumber.
The United Kingdom’s (UK’s) 10-year Gilt yield closed the week at 4.69%, remaining flat over the week. Inflation pressures persist, with UK consumer price growth hitting 3.8% in July, driven by food and airfare costs, while services inflation rose to 5.0%. Weak UK economic growth and rising inflation pose headwinds for the UK bond market and are likely to limit gains.
South Africa’s 10-year bond yield traded at 9.61%, holding steady for the week and maintaining its lows for the year-to-date. Strength in precious metals revenues and subdued inflation data underpinned the local bond market, which continues to remain resilient in the face of geopolitical pressure.
US equities held near record levels this week. The market gained confidence from Fed chair Powell’s dovish statements at Jackson Hole. Moreover, the second quarter GDP print was stronger than anticipated, painting a picture of US economic resilience despite the tariff uncertainty. Nvidia rounded off the week with yet another strong quarterly result. The market is likely to tread water until the PCE data release later today.
European markets closed the week on a mixed note, with indices like the FTSE 100 in London down 1.0%, while Germany’s DAX and France’s CAC 40 fell 1.3% and 2.6%, respectively, amid concerns over US tariff policies and weaker industrial output. Optimism around a US Fed rate cut in September failed to offset the impact of weaker euro area consumer confidence, pointing to ongoing economic concerns.
South Africa’s JSE All Share Index held steady above the 102,000 mark. Strong earnings reports from the gold miners, large industrials and financial shares failed to push the market higher, perhaps reflecting some fatigue after a gain of 20% for the year-to-date. Economic indicators paint a cautious picture and geopolitical uncertainty persists.
Gold prices exhibited volatility but closed the week at $3,410/ounce, a slight uptick from the previous week’s $3,335/ounce, driven by a weakening US dollar and Powell’s Jackson Hole speech, which hinted at a potential September rate cut. Investors remain cautious ahead of today’s key PCE inflation report, while geopolitical uncertainties and expectations of looser US monetary policy continue to support gold’s appeal as a safe haven asset.
Brent crude prices closed the week at $68.40/barrel, up from the previous week, driven by signs of persistent Russia-Ukraine tensions and a sharp six-million-barrel drop in US crude inventories, signalling stronger demand. Prices fluctuated during the week as markets weighed tighter supply dynamics against bearish fundamentals like weak demand growth and increased production from the expanded Organisation of the Petroleum Exporting Countries, OPEC+.
The US Dollar Index closed around 97.97, flat from the previous week and largely indifferent following Powell’s Jackson Hole speech. The dollar held steady with investors awaiting the upcoming US inflation report for further direction.
The euro strengthened slightly against the dollar this week, closing at $1.1670/€, up 0.08% from the previous week. Expectations of steady European Central Bank rates, at 3.5% and potential US trade tariff concerns limited gains.
The British pound also weakened slightly against the dollar, ending the week at approximately $1.35. Sterling showed signs of consolidation after posting a 2.6% gain since the start of the month.
The R/$ exchange rate fell to R17.72/$, down 1.5% from the previous week. The rand gained 2.67% since the start of the month, supported by expectations of a narrowing interest rate differential and positive sentiment towards South African bonds.
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