A poll by Reuters showed that almost 60% of economists believe that rates have the inflation risks. If Powell recognizes this concern, markets can respond with higher treasury yields, a stronger dollar and downward pressure on shares, especially in speed-sensitive sectors.
Powell to defend Fed’s independence in the midst of political pressure
In addition to inflation and trade policy, Powell can be confronted with control over the independence of the FED. Former President Trump has criticized Powell’s decisions and suggests increasing influence of the White House on monetary policy. Although Powell has defended the autonomy of the FED, all signs of political interference markets can deny.
Regular matters, in particular the capital requirements of Basel III for large banks, can also stand up. Legislers, including Senator Elizabeth Warren, have expressed concern about the supervisory role of the FED, which add a new layer of uncertainty.