Of Jonathan Levin*

The president of the US Federal Bank (Fed) Jerome Powell counterattacked to the president Donald Trumpafter skillfully avoided the confrontation for months. In a question and answer session on Wednesday, Powell presented the chaotic tariffs as just bad for the economy, downplayed the approach adopted by the government efficiency and presented arguments for which he believes he could afford him. In a time of growing concern about the Fed’s independence, it has made us all a favor showing that it is focused on the main goals of the central bank.

As expected, Trump raised the issue again on Thursday. In a post on Truth Social, he said that the Fed should have already reduced interest rates and that “the end of Powell’s term cannot come quickly”!

Let’s start with Powell’s defending the Fed’s independence. “Our independence is a matter of law,” Powell told the Economic Club of Chicago, clearly contradicting a president who has systematically tried to intimidate the central bank on social media and has already tried the independence of other organizations. Supreme Court chief John Roberts has allowed Trump to dismiss top officials to other services – a case that some consider to be preparing a more sensitive battle for whether Trump can dismiss or relegate him. He noted that he did not believe that this case will be applied to the Fed and that he will never succumb to external forces.

“We will never be affected by any political pressure,” Powell said. “People can say whatever they want, it doesn’t matter. This is not a problem. But we will do what we do strictly without taking into account politicians or any other exogenous factors. “

In his conversation with former governor of the central bank of India Ragouram Rajan, Powell maintained his temper and avoided calling Trump. But his responsibility was an undisputed derogation for the central banker, who has virtually avoided commenting on the White House policy despite Trump’s public attacks. His comments came at a time when concerns about Fed’s independence are starting to worry about the market. They also come as Trump’s commercial policies threaten to put the central bank in a difficult position – essentially trying to limit the dangers to its orders for stable prices and labor market at the same time.

Powell did not cheer his words about the ever -changing duty plans, which could push US duties into imports to the highest levels of the last century – depending on which day of the week you decide to calculate the numbers. Businesses and investors could be hurt if clarity for the future is not restored, he noted. Elsewhere, he expressed concern that cuts in scientific research may have “impact on economic growth, productivity, health, at all levels”.

It was clear about the issue of duties and how this would affect the Fed. “Policy results are likely to remove us from our goals,” he said. “Unemployment is likely to grow, as the economy is probably slowing down, and inflation is likely to increase, as duties find their way and some of these duties is being paid by the State. So this is the strong possibility. ” The Fed’s “obligation” was to maintain long -term expectations for prices anchored, he said. Economists tend to believe that inflation expectations are a self -fulfilling prophecy.

Powell also mitigated his usual commitment to avoid commentary on fiscal policy and did what he was equivalent to overtly criticized the Department of Government Efficiency and cuts in services. As Powell rightly noted, social security, medical care and Medicaid are an overwhelming and increasing part of the budget pie and only with the reform of rights can any government make substantial progress in spending. “When people focus on cutting domestic expenditure, they do not actually work on the problem,” Powell said. ‘Domestic discreet expenses are already decreasing [ως ποσοστό των ομοσπονδιακών δαπανών]. I like to point out this point, because much of the dialogue made by politicians is about domestic discretion, which is not the problem. “

At the end of the day, I suspect that Powell’s Tsamboukas will prove to be an advantage for the economy and markets in a period of huge political turmoil. This was a bit difficult to estimate on Wednesday, as Powell’s statements seemed to deepen the losses of the S&P 500, with some traders focusing on his cautious attitude on reducing interest rates to tackle financial conditions. In the medium term, investors should be aware that the Central Bank of America remains committed to its goals for maximum employment and steady prices, even if it needs to fight for its ability to accomplish its work.

Jonathan Levin is a column of Bloomberg Opinion column and focuses on US markets and finances