Asia easing fast and furious against Trump’s tariffs – Asia Times

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Japan — It’s been years since financial activities in Bangkok had global repercussions. But the Bank of Thailand’s surprise rate cut on Wednesday ( February 26 ) signals how rapidly Donald Trump’s trade curbs are upending Asia’s 2025.

Bangkok was the site of the Asian financial crisis in 1997, the next day it experienced financial conflict. Back then, the economy of Thailand, Indonesia and South Korea collapsed in spectacular currency crises style.

That dark time isn’t always about to repeat itself. The area has come a very long approach: banks are healthier, currencies trade more widely, governments are more visible, markets are more tenacious and main banks have enormous foreign exchange reserves.

But the BOT’s 25 basis-point cut to 2 %, its lowest level since July 2023, follows similar moves in Jakarta and Seoul to counter downside risks that bear US President Trump’s prints.

Bank Indonesia kicked points off with a 25 % interest rate cut in the middle of January. Governor&nbsp, Perry Warjiyo&nbsp, called the split “pro-stability and development” given “global and regional economic relationships”.

The Bank of Korea hit the economic fuel this year. On Tuesday, Governor Rhee Chang-Yong’s team sharply reduced its economic growth projection as it cut prices to 2.75 %. In the BOK’s speech, it cited Trump’s fast-expanding business conflict as the main motivator for easing.

Due to deteriorating socioeconomic sentiment and US price policies, the BOK predicted that local demand growth and export growth would be slower than originally anticipated. It is believed that local economic growth will continue to be stable while inflation will continue to grow.

Of course, the BOK is burying the result, financially speaking. Trump, it’s obvious, is only just getting started. And in a way that sends the three markets into a whirl and battens down the doors. On Thursday, for example, Trump said he’ll double tariffs on China to 20 %.

” While industry have begun to respond to these advances, deep tax risks are still being underpriced”, says Kamakshya Trivedi, a leading global strategist at Goldman Sachs.

Deborah Tan, an analyst at Moody’s Ratings, says Asia’s “overall plan response may be crucial in determining the total effect on credit power. We expect governments will probably work pragmatically, aiming to avoid increase with the US, preferring to communicate on a diplomatic basis, as shown by new developments”.

Even Trump seems unsure about where he’ll impose tariffs next and the scope of the curbs, according to earlier statements. Trump immediately addressed tariffs in Canada and Mexico at a Cabinet meeting this week about the latter being a done deal. Then, he suggested no taxes will ultimately be imposed.

” I have to tell you that, you know, on April 2, I was going to do it on April 1″, Trump said. ” But I’m a little bit superstitious, I made it April 2, the tariffs go on. Not all of them, but many of them.

In a note to clients, Capital Economics claims that Donald Trump’s victory in the November presidential election has only increased the uncertainty by causing significant penalties, tariffs, and the potential upheaval of traditional geopolitical alliances, which could also cause the rest of the world to become more uncertain.

The uncertainty, Capital Economics warns,” could end up weighing on global investment and consumer spending for an extended period, particularly if Trump repeatedly pushes back his tariff deadlines”.

To Paul Donovan, chief economist at UBS Global Wealth Management, the bewilderment factor makes for a uniquely challenging year for markets.

Case in point, he says, is” Trump’s very big announcement on reciprocal tariffs, which turned out to be a plan to investigate taxing US consumers at a future date. Markets had to decide whether the president was being a pushover or a protectionist, and for the time being, they are leaning in favor of pushover.

Of course “delay is seen as an opportunity to do’ deals,'” Donovan says. ” So far, such deals have been more spin than substance”.

Even though the headlines about US import tariffs continue to be a hot topic, according to Thierry Wizman, global rates strategist at Macquarie Bank,” there has been a clear deceleration of the” tax train.” There’s a sense that the administration’s approach to economic and national security issues is more transactional and less punitive”.

One explanation for the ever-shifting trade war plans is that Trump does indeed have his “kryptonite” ,&nbsp, notes Benjamin Tal, economist at CIBC World Markets. Shortly after the stock market reacted negatively to the news, Canada and Mexico were granted 30-day extensions on the 25 % tariff, Tal says.

One world leader who’s not confused about the turbulence to come is Xi Jinping, whose economy is Trump 2.0’s main obsession. Trump’s most recent announcement is a plan to levy an additional 10 % on imports from mainland China.

However, this week, China’s leader sounded more jittery than confident when he urged officials to stay calm as Beijing’s economic storm clouds loom.

China “must strengthen its political will and calmly respond to challenges brought about by changes in the domestic and international situation,” Xi told Politburo and State Council party members, according to Xinhua News Agency.

As Trump raises the stakes, Xi’s economic team begins. Trump has so far avoided paying 60 % tariffs on China, which he frequently threatened during the campaign trial. And now he’s reversing his previous approach, Joe Biden, and specifically focusing on the trade war.

For all its Biden criticisms, Team Trump is mulling ways to expand Biden’s curbs on Chinese semiconductors. The White House is also encouraging influential allies around the world to intensify efforts to stop China’s chip industry from expanding.

DeepSeek, a Chinese AI startup, is being investigated in the US. White House investigators are looking into DeepSeek‘s suspicions that it violated export controls to purchase sophisticated Nvidia chips in Singapore through a third party.

Tariffs, though, are still the main Trumpian event, raising collateral damage risks for Asia. And Trump trade advisors, like China hawk Peter Navarro, are angling for more.

” Trump’s new ‘ America First Investment Plan ‘ seals the fate of a deepening US-China conflict, reinforcing the earlier America First Trade Plan”, says Yale University’s Stephen Roach, formerly chairman of Morgan Stanley Asia.

” This isn’t an artful ploy for a grand deal with Beijing. Trump’s MAGA base is incredibly anti-China, which makes it all but impossible for him to change his tune. He’s cornered”!

From Trump World, new ways to complicate China’s year keep coming in. Case in point: possible fees on China-made commercial ships used for moving goods to slow China’s domination of ship-building.

China’s place in harm’s way has officials in Bangkok, Jakarta, Seoul and elsewhere slashing rates – and odds are there’s more monetary easing to come. That includes the Philippine central bank, which cut interest rates by 25 basis points in December.

It’s not that developing Asia worries about sustaining direct hits from Trump’s tariffs. It’s prepping for the indirect, but still devastating, blows to come as mainland China’s trade, investment and tourism shifts into reverse. China, which is subject to Trump’s tariffs, poses a serious threat to all of the world’s South.

Risks abound as Trump and his unelected enforcer Elon Musk systematically monitor US institutions that safeguard the value of US Treasury securities and the dollar, which are crucial to developing Asia’s trade-dependent economies. A US national debt that is close to$ 37 trillion would be significantly increased by the trillions of dollars in proposed tax cuts, according to Trump.

Trump and Musk are undermining the Internal Revenue Service’s function, which could alarm investors and credit rating organizations. This includes Asian central banks, which have nearly$ 3 trillion in assets.

Regardless, there are numerous economists who disagree on whether Trump’s bite will be as bad as his bark. &nbsp,

Our “aggressive Trump” scenario, which assumes high trade tariffs and significant deportations, would be stagflationary for the US economy and likely plunge the rest of the world into recession, according to Schroders ‘ economists in a note.

But, Schroders argues, “upside risks are also emerging. While DeepSeek could speed up AI adoption, macroeconomic reform is back on the agenda for governments looking for growth, and bank lending displays signs of life.

The economists add that” steep falls in oil prices could also conceivably relieve inflation pressures later in 2025″ at the same time.

Of course, the inflationary effects of Trump’s tariffs could dominate global pricing dynamics instead.

According to Chief Goldman Sachs economist Jan Hatzius, Trump’s tariffs will increase personal consumption expenditures (PCE), the preferred measure of the US Federal Reserve, by about 1 %. Already, that rate is running at 2.8 % annually.

According to our general rule,” We estimate that the proposed tariff increases would increase core PCE prices by 0.9 % if implemented, based on the assumption that every 1percentage point ] increase in the effective tariff rate would raise core PCE prices by 0.1 %.”

Gene Ma, head of China research at the Institute of International Finance, adds that “tariff-driven inflation complicates monetary policy, raising uncertainty for the Fed”. And for developing nations who fear that Trump might restore Asian financial crises.

Follow William Pesek on X at @WilliamPesek

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Trump risks backlash with fast and loose US debt claims – Asia Times

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The US senator, Donald Trump, is challenging official numbers around the country’s national debt, suggesting probable fraud in its analysis. The government’s comment have given a contentious twist to a problem that is both significant and significant for the United States. And it has implications for both the global market and the financial markets as well.

The total amount of cash the US government owes is the total amount spent on paying over its income in addition to years of borrowing. Over time, this volume has grown considerably, becoming a focal point for political disputes and financial forecasts.

The US bill time indicates an amount of debt of over US$ 36 trillion, related to$ 107, 227 per US resident.

Based on the US overall public debt collection, this number is based. The US bill has grown noticeably since the 2008 crisis, with a further increase occurring during the Covid crisis, is obvious.

This results in a US national debt that is roughly 121 % of the GDP. For comparison, the UK’s Office for Budget Responsibility puts American federal debt at 99.4 % of GDP in 2024.

Given that it is necessary to spend money to support their markets during recessions, this style is prevalent in developed economies.

Trump has also asserted that the US may include less debt than was initially believed as a result of this alleged fraud. Putting off possible fraud, it is well known that the title debt figure exaggerates the amount of national debt.

Due to the fact that it includes debts held by the Federal Reserve Banks as well as debt owed to one portion of the US state to another, When these payments are taken out of the US national debt data, we can determine how much debt is held by the general public. Although this is substantially lower, it continues to grow in a similar way over time.

How much more of the US’s GDP has grown as a percentage of GDP:

The conventional wisdom ( kindness of Mr Micawber, a figure in Charles Dickens ‘ book David Copperfield ) is that an income greater than expenses equal pleasure, while the same results in pain. However, this does not always apply to public loan.

In the end, we have a loan to ourselves ( and our future generations ). What truly matters is its long-term conservation, meaning that the debt-to-GDP amount is not following an incendiary design.

This kind of design could lead to a higher risk premium ( in other words, the interest ) being demanded by investors, which would have a negative effect on private opportunities and growth prospects. Moreover, it likely raises the risk of definition.

Our research has demonstrated that there is no universally accepted level below which debts can become untenable. Instead, each case requires context-specific analysis looking at macroeconomic fundamentals such as inflation and unemployment, financial crises as well as the ( potentially self-fulfilling ) market expectations.

Trump’s taking

Without providing any supporting evidence, Trump has just questioned the validity of the methods used to determine the national debt. He asserts that potential fraud has been discovered by the Elon Musk-led Department of Government Efficiency ( DOGE ). If confirmed, these findings could drastically affect perceptions of the country’s economic status.

His controversial claim that the US is” not that wealthy right now” has also been highlighted by reports. We owe$ 36 trillion because we let all of these countries exploit us. The US debt, which was the result of decades of fiscal policy choices in the wake of various economic shocks, is a source of perplexity for these claims. Bill itself doesn’t raise any concerns for experts.

Although foreign stakeholders ‘ holdings of US federal debt have increased over time, less than 30 % of GDP is currently attained. This is down from an all-time deep of 35 % during Trump’s second name back in 2020 during the pandemic.

Of the US national debt held by foreign nations, the largest quantities are owned by Japan, China, and the UK. However, when other nations hold US federal loan, it has nothing to do with” taking benefits” of the US.

In fact, the US dollar is the world’s powerful car money. It is on one side of 88 % of all trades in the foreign exchange market, which has a global daily turnover of$ 7.5 trillion.

As such, the US gains from a so-called “exorbitant opportunity”. This benefit is derived from the worldwide demand for the US Treasury securities’ and the US dollar’s status as” secure have ns,” which has allowed the US to issue debt with interest rates that are relatively lower.

According to research, the US dollar’s” safe have n” status has increased the US’s highest level of sustainable debt by about 22 %. What’s more, it’s estimated to have saved the US government 0.7 % of GDP in annual interest payments.

These benefits come from the fact that US Treasury securities have historically been viewed as risk-free property. Because they are backed by the US government’s full faith and credit, this is especially true during times of severe international financial strain. The US has a proven track record of paying its debts responsibility.

Trump’s remarks, however, could lead to merchants reevaluate the accuracy of official information and the potential risks associated with US Treasury securities and undermine the confidence of monetary areas. These remarks, whether true or false, effect on delicate issues of authorities transparency and fiscal responsibility.

Any advice that the US president’s debt figures are uncertain could be disruptive. Because of this, they may raise questions about the US governmental system’s dependability among the foreign buyers and the holding companies of these securities.

Similar to Trump’s tariff threats, it may be difficult to claim that various nations who own a sizable portion of the US government’s debt are opportunistic. The president’s political diplomatic relations with key debts may become strained, which could lead to greater uncertainty in global financial markets.

For maintaining confidence in the US economy and the ecology of the global financial system, distinguishing between politically charged rhetoric and governmental ecology of the US federal debt will be crucial.

Gabriella Legrenzi is senior teacher in economics and finance, Keele University, Reinhold Heinlein is senior lecturer in finance, University of the West of England, and Scott Mahadeo is senior lecturer in finance, University of Portsmouth

This content was republished from The Conversation under a Creative Commons license. Read the original content.

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If Trump attempts World Bank retreat, China-led AIIB could step in – Asia Times

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Donald Trump is well known for his hostility toward internationalism and international businesses. The US senator made the announcement to leave the Paris Agreement on Climate Change and the World Health Organization shortly after taking office on January 20, 2025.

Was the World Bank and the International Monetary Fund follow? Surely, supporters of the twin organizations – that have formed the backbone of world economic order for 80 years – are concerned. A Trump-ordered evaluation of Washington’s support for all international organizations has sparked fears that the US will endow more money or withdraw it immediately.

But any receding of U. S. authority in international financial institutions may, I believe, run counter to the president’s apparent political goals, creating a suction for China to move into and get on a bigger international role.

In particular, weakening the World Bank and any other multilateral development banks, or MDB, that has a large US presence may present an opportunity for a little-known, fairly new Chinese-led global business: the Asian Infrastructure Investment Bank– which, since its inception, has supported the pretty diplomacy the U. S. is attacking.

AIIB’s contradictory function

Nine years ago, China established the Asian Infrastructure Investment Bank ( AIIB ) as a means of investing in infrastructure and other related sectors in Asia while promoting “regional cooperation and partnership in addressing development challenges by working in close collaboration with other multilateral and bilateral development institutions.”

Since then, it has provided an example of an international organization that is willing to cooperate closely with other significant international organizations and adhere to global growth banking standards and standards.

This may conflict with the portrayal of Beijing’s global efforts that are frequently portrayed by China eagles, of whom there are many in the Trump presidency, who frequently envision a China that is determined to undermine the progressive, Western-led world order.

However, as some researchers and other Chinese experts have suggested, Beijing’s policies in international monetary management are frequently nuanced, with actions that both support and denigrate the liberal world order.

As I explain in my new guide, it is apparent that the AIIB is a paradox today: an institution created by an authoritarian government but connected to the rules and standards of the progressive global order.

A group of men and women sits during a forum.
Foreign Finance Minister Lou Jiwei addresses the audience at the Asian Infrastructure Investment Bank signing ceremony on October 24, 2014, in Beijing. Photo: Takaki Yajima / POOL

The AIIB has a strong connection to the rules-based system, as demonstrated by its numerous joint relationships with other significant multilateral development banks, including the World Bank and the Asian Development Bank under the leadership of Japan.

In this context, the AIIB might offer a Taiwanese opposition in a country where US leadership is waning.

The AIIB’s collaborative pattern

Multilateral development banks have been providing the crucial role of lending billions of dollars annually to promote economic and social development for years.

They can be important sources of funding for poverty reduction, inclusive economic growth and lasting development, with a newer focus on climate change. These global lenders have also been remarkably resilient in the current climate of discord and crisis, with member countries earnestly looking into ways to improve their standing.

At the same time, MDBs frequently receive criticism from civil society organizations because they point out areas of poor performance and are concerned about potential negative effects of the main MDBs ‘ greater focus on working more closely with the private market. Big” MDBs were built around a set of geopolitical and economic strength relationships that are disintegrating before our eyes,” according to MDB professional Chris Humphrey.

There was a lot of concern among key countries about China’s motives when Chinese President Xi Jinping proposed in 2013 the establishment of the AIIB to aid in the development of infrastructure in Asia.

The Obama administration responded by urging different nations to abstain from joining. Its priority was that China may use lending to expand its influence in the area without upholding strict environmental and social standards.

However, all the other main nonborrowing countries, with the exception of Japan, joined the new lender. Now, the AIIB is the second-largest international development banks in terms of member states, behind simply the World Bank. It now has 110 member governments, which translates to over 80 % of the world population. With US$ 100 billion in cash, it is one of the medium-sized international loans.

From the get-go, the AIIB was designed to be collaborative. Jin Liqun, the first president of the bank, has a long history of multilateralism, having spent many years working for the Chinese banking department, the World Bank, the Global Environmental Facility, and vice president of the Asian Development Bank.

Previous executive managers and staff from the IMF and other development bankers were among the international group of experts who assisted in the creation of the AIIB, as well as two American with much careers at the World Bank who played key roles in the creation of the company’s articles of agreement and its environmental and social model.

How the AIIB influenced people to learn from them

In a variety of ways, the bank fits into the international development environment. The Asian Development Bank’s mandate, which promotes “regional cooperation and collaboration in addressing growth challenges,” is directly related to the Asian Development Bank’s base.

The AIIB has environmental and social norms in line with other important multilateral development banks, as well as its conventions and policies.

The AIIB collaborates closely with its classmates, besides stealing fundamental ideas. The World Bank originally ran the AIIB’s government functions. In its early years, the AIIB co-financed a significant portion of its assignments with other bilateral development institutions.

In a recent sign of cooperation, in 2023, a deal between the AIIB and World Bank’s International Bank for Reconstruction and Development ( IBRD ) saw the AIIB issue up to$ 1 billion in guarantees against IBRD sovereign-backed loans. This increased the IBRD’s capacity to provide more money, while diversifying the AIIB’s payment collection.

As of February 6, 2025, the AIIB had 306 approved initiatives totaling$ 59 billion. Its two biggest lending sources are transport and power. Recent projects that have received approval include funding for Uzbekistan and Kazakhstan’s wind power plants and an Indian solar power plant. India, which has a slippery partnership with China, is one of the company’s largest consumers, together with Turkey and Indonesia.

collaborating and competing with China

From its conception until recently, the bilateral AIIB has frequently distinguished itself from China’s diplomatic efforts. China’s Belt and Road Initiative, a framework for network borrowing by Chinese corporations that has been criticized for lacking transparency and accountability, is one of them.

However, some Belt and Road-linked initiatives have faced problems about problem, costs and the transparency of the loan contracts.

The AIIB has made more mention of the benefits of working with Belt and Road lenders in recent years, and the lender now houses the Secretariat of a service called the Multilateral Cooperation Center for Development Finance, which provides grants and assistance to developing nations seeking to finance equipment in nations where Belt and Road lending takes place. This may blur the distinction between loaning under Belt and Road and AIIB, but it doesn’t appear to lower the company’s standards.

No fresh concerns about the impact of the Chinese government at the AIIB. In June 2023, Canada froze its ties to the bank in a pending investigation into a French employee’s dramatic resignation after claiming that the bank was ruled by Communist Party users.

No additional member countries expressed their concern, and Canada has not yet released a report on the situation. An internal review by an AIIB executive director contained no findings to support the claims.

It would be wise for the new US administration to consider the variations in China’s strategies in global economic leadership as its formulation of its policies toward China may require more complex responses. Recognition of areas of assistance, competition, and conflict calls for more complex responses. The US will cooperate with China in many areas while competing with China.

Interestingly, any actions by the Trump administration to reshape multilateral organizations could put the AIIB in a better position to collaborate than the world’s leading multilateral development banks and the US, regardless of whether or not it is an anomaly. role.

At American University, Tamar Gutner is an associate professor.

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Asia’s impact investing gains traction as institutional players step up | FinanceAsia

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Major investors and policymakers are accelerating the formalization and expansion of Asia’s influence investing industry. At the Tideline Compass Series section on February 18, business leaders discussed the state’s growth path, emerging challenges, and the steps needed to promote administrative implementation.

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HSBC pre-tax profit climbs 6.6% to .2bn; plans .5bn cost savings by end of 2026 | FinanceAsia

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HSBC’s profit before tax ( PBT ) climbed by$ 2 billion to$ 32.3 billion for the financial year ending December 31, 2024, according to a regulatory announcement, profit after tax increased by$ 400 million to$ 25 billion. Overall revenue across the group climbed from$ 66 billion to$ 66.85 billion. &nbsp,

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Breaking: HSBC pre-tax profit climbs 6.6% to .2bn; plans .5bn cost savings by end of 2026 | FinanceAsia

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HSBC’s profit before tax rose by$ 2 billion to$ 32.3 billion for the financial year ending December 31, 2024, according to a regulatory announcement, profit after tax increased by$ 400 million to$ 25 billion. Overall revenue across the group climves from$ 66 billion to$ 66.85 billion. &nbsp,

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Morrison Foerster rehires Scott Jalowayski and appoints HK partner | FinanceAsia

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Scott Jalowayski is rejoining Morrison Foerster as a partner in the corporate group in its Singapore office. 

 

Jalowayski arrives from Gibson, Dunn & Crutcher with over 20 years’ experience advising clients on complex international private equity and M&A transactions, and has practiced in New York, Hong Kong, Japan, and Singapore.

 

At Gibson, Dunn & Crutcher, Jalowayski was a founding partner of the firm’s Asia private equity practice and served most recently as co-chair of its global private equity practice group. Jalowayski previously practiced at Morrison Foerster, spending three years in the firm’s Japan office and five years in its Hong Kong office, where he made partner before leaving in May 2008. 

 

Jalowayski advises private equity funds, their portfolio companies, and other global and regional investment managers on their investment and M&A transactions in Asia. He has experience across leveraged and unleveraged control acquisitions, minority investments, joint ventures, divestures, and restructurings, and sector, including life sciences and healthcare, interactive and digital media, and technology, alongside real asset and infrastructure enterprises, according to a media release. 

 

“[Scott] strengthens our private equity and M&A capabilities on the ground in Singapore and brings significant, cross-industry experience to Morrison Foerster,” said Paul McKenzie Morrison Foerster mergers & acquisitions partner. 

 

Tabitha Saw co-office managing partner, Singapore at Morrison Foerster, added: “Scott brings to the firm significant private equity and M&A credentials and core relationships in both Southeast Asia and Japan. His presence will deepen our bench in these regions and in industries that are strategic to the firm, including energy transition, renewables, technology, and digital infrastructure.” 

 

In addition, Xiaoxi Lin has joined the firm as a partner in the corporate group based in Hong Kong, brings over 15 years’ experience to Morrison Foerster, with a private equity and M&A practice with established client relationships in the Greater China, Asia, and US markets.

Lin joins Morrison Foerster from Linklaters where he was a partner in its private equity and US public M&A practices. He previously practiced with Kirkland & Ellis and Davis Polk & Wardwell, with experience based in Hong Kong, New York, and Beijing


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Trump challenges to Fed independence recall ’70s Nixon-Burns fiasco – Asia Times

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Like the’ 20s of the 21st century, the ‘ 70s of the 20th century had an prices issue. The issue persisted throughout the century, however, it worsened. That was largely due to the fact that the Federal Reserve Board head initially let himself be pushed around by the US leader.

Yesterday’s Fed seat is determined not to let that happen again. He will need all the political will and bravery he may conjure to avoid it.

Fed chair Arthur Burns was telling President Richard Nixon that lowering interest rates in an inflationary business was a blunder for the majority of 1971. For a logical, if possibly mistaken, political purpose, Dixon persisted.

For the US in the 1970s had an awkwardly large 6 % poverty level, in addition to inflation. In order for Burns to loosen monetary policy in the lead up to 1972, he felt that poverty was a greater threat to his candidacy than inflation. When Nixon suddenly threatened policy to reduce the Fed’s freedom, Burns folded.

Now the Fed’s liberation is back in the sights. Not much after appointing him in 2018, President Donald Trump began to lose patience with Fed Chair Jerome Powell. The following morning, he blasted him once more.

Under President Richard Nixon, Arthur Burns, the head of the Federal Reserve Board, pressed him to lower interest rates, and inflation deteriorated. Jerome Powell, the current Fed head, is determined to reduce in response to positive information, no political demands. Image: DTN

The president declared he would require lower interest rates during a virtual conference of the new Davos forum. He claimed that the leader should be in charge of interest rates in a campaign appearance next month. Some of his officials made plans earlier this year to increase the power of the Fed to the executive branch.

Every leader wants low interest rates, as I pointed out in a blog about those ideas last May. Fearing financial-market opposition, but, most seethe in silence when the Fed doesn’t provide them what they want. Some, Nixon most notably, try to force the Fed.

Trump is in Nixon’s station.

The issue with this is that there are instances when high interest rates provide the terrible treatment the economy requires. Without them, cpi you spin out of control, as it did in the ‘ 70s. Long-term inflation may wreck an economy.

While high interest rates don’t get public favour, neither does prices, which likely cost the Liberals the next election. But the sick effects of inflation may be felt on some other voter’s view, the politician hopes. High interest rates and the economic downturn, in the politician’s opinion, could prevent winning the upcoming election.

And that’s why Congress established a relatively independent Federal Reserve Board by taking interest-rate selections out of the control of officials. If you have a 14-year name as a Fed government or are leader of a local Federal Reserve bank, it’s easier to make the controversial decision to raise rates.

Independence doesn’t ensure errors won’t be made. It only increases the likelihood that, if they are made, they will be economical judgmental mistakes rather than attempts to win voters ‘ pursuit.

The Fed’s democracy isn’t complete. Legislation was reverse it if Congress passes it. The Senate approves the rulers, and the leader appoints them. The Fed head frequently answers questions and testifies before parliamentary commissions.

However, the governors do have a good deal of freedom because they are elected just for a reason and have longer terms. Recent Fed chair Powell wants to keep things that way, just like he would any other Fed official. In his six years as head, Powell has demonstrated political astuteness in dealing with Congress.

Doing the same with this leader may prove more difficult.

The seven rulers and five Federal Reserve Bank presidents who are members of the rate-setting Federal Open Market Committee held a meeting in January, but they didn’t give the president what he claimed he would require. The FOMC voted this time to keep costs intact after dropping their standard interest rate by a full percentage point since last September.

At his post-meeting press conference, Powell said the Fed wants to see more progress in reducing inflation toward the Fed’s 2 % purpose before cutting again. To queries about the government’s remark that he would require lower prices, Powell gave uncombative answers.

” The president’s statement will not cause me to respond or post in any way.” It’s not suitable for me to accomplish so”, Powell said. The people should be assured that we will continue to do our jobs as we have always, using our resources to achieve our objectives, including steady prices and highest employment.

He stated that the Fed may continue to use financial data to inform its decisions. ” Don’t seem for us to do anything more”.

Did Powell succeed in keeping his head down? That’s up for debate. It’s a good start, nevertheless.

President Trump has shown he is vulnerable to market responses. He may want to keep in mind that the financial industry will be very damaging if a pending Fed rate split is perceived as caving to his needs. An impartial Fed is desired by the industry.

Urban Lehner, a former long-time Asia journalist and director for the Wall Street Journal, is now editor professor of DTN/The Progressive Farmer. &nbsp,

This&nbsp, content, originally published on February 4 by the latter media business and then republished by Asia Times with authority, is © Copyright 2025 DTN/The Progressive Farmer. All rights reserved. &nbsp, Follow&nbsp, Urban Lehner&nbsp, on Twitter: @urbanize

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