Trump, Powell dispute raises concerns about renewed inflation

on Monday, the yield on U.S. long-term Treasury bonds rose, and the U.S. dollar regained its decline. Prior to this, White House economic adviser Hassett stated that Trump and his team are continuing to study whether they can dismiss Federal Reserve Chairman Powell. This statement has raised concerns about the independence of the Federal Reserve. The market also believes that this issue may lead to an increase in inflation. Ian Lyngen and Jon Hillman, capital market interest rate strategists at Montreal Bank, said, "The consequences of Trump's tariff plan have put monetary policy makers in a dilemma, as tariffs are expected to change the economic trajectory, causing the Fed to deviate from its two long-term goals." "There is a feeling that the inflation task in the Fed's dual mandate has once again become a more explicit priority. Powell not only deliberately emphasizes that price stability is a prerequisite for maximum employment, but also continues to use relatively strong language on the price stability target, rather than maximum employment." Meanwhile, Will Compernolle, macro strategist at FHN Financial, warned that if Trump dismisses Powell, U.S. Treasury bond yields could rise significantly. He said, "The importance of central bank independence in stabilizing long-term inflation expectations cannot be emphasized enough." "This topic is causing investors to move away from U.S. assets marginally, but if the market perceives a real risk to the Fed's credibility, long-term yields will skyrocket, rather than rise a few basis points."