Most reserve managers surveyed believe the United States’ Federal Reserve’s independence is at risk, as U.S. President Donald Trump steps up his attacks on the Federal Reserve chair.
Around two thirds of reserve managers fear for the Federal Reserve’s independence, according to a UBS Asset Management survey.
Trump said that Federal Reserve chair Jerome Powell “should resign immediately!!!” this week in a post on Truth Social. He has repeatedly criticised Powell for declining to cut interest rates, and has called for his resignation several times.
Federal Housing Finance Agency head Bill Pulte also recommended a congressional investigation into Powell. "I am asking Congress to investigate Chairman Jerome Powell, his political bias, and his deceptive Senate testimony, which is enough to be removed 'for cause,’” Pulte wrote.
According to Powell, the Federal Reserve is currently waiting to assess the effects of the U.S.’ new tariff policies on inflation before considering interest rate cuts.
UBS has projected rate cuts of 25 bps in September, “as FOMC [Federal Open Market Committee] participants have expressed the view that tariff-induced inflation should be a one-off price increase and not begin a pattern of higher prices going forward.”
Reserve managers also reported growing foreign exchange investment risks and concern about U.S. assets, the UBS survey found.
Asset price volatility across markets was ranked as a serious concern around foreign exchange investment for 60% of reserve managers surveyed. Rising U.S. interest rates, exchange rate volatility, and geopolitical weaponisation of foreign exchange reserves were also risks, according to around half of these managers.
Nearly half of the managers surveyed said deterioration of the rule of law in the U.S. could significantly impact their asset allocation.
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