President Donald Trumps recent call for Federal Reserve Chair Jerome Powell to resign has caused concern, in the markets as investors look for ways to shield themselves from growing long term inflation and heightened market volatility.
Trumps critique of Powell and the heightened focus on renovation expenses at the Federal Reserve building have sparked concerns about damage to the central banks reputation due, to political influence despite Powell being protected from dismissal based on policy disagreements in a legal sense.
Investors are increasingly concerned that if the Federal Reserve becomes influenced by factors it may speed up the process of lowering interest rates which could lead to higher inflation and an increase in long term yields, in the financial market sector The 30 year Treasury yield surpassed 5 percent on Tuesday marking its highest level since May of this year.
Guy LeBas from Janney Capital Management cautioned that the markets curve could become more pronounced if there is a belief that the Federal Reserve will reduce rates without regard to inflation levels—potentially leading to significant fluctuations, in long term yields.
The latest meeting notes from the Federal Reserve indicated a reluctance to implement interest rate decreases in July; however financial markets are still anticipating cuts to begin in September as evidenced by pricing trends. Traders are also noting anticipated inflation rates through the breakeven inflation rates, on five year Treasury Inflation Protected Securities (TIPS) which are currently indicating a rate of 2 \%.476% marking a peak in the past three months.
Powell has consistently mentioned his plan to complete his term until 2026; however the speculation surrounding his removal from office and worries about the U.S.s financial future are leading to careful adjustments, in both bond and stock markets.
