{"id":152946,"date":"2019-08-06T10:30:09","date_gmt":"2019-08-06T14:30:09","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=152946"},"modified":"2019-08-06T10:04:15","modified_gmt":"2019-08-06T14:04:15","slug":"open-letter-regarding-fed-independence","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/08\/open-letter-regarding-fed-independence\/","title":{"rendered":"Open Letter Regarding Fed Independence"},"content":{"rendered":"
August 6, 2019<\/div>
\r\n<\/div><\/div>

By <\/strong>Orbex<\/strong><\/a><\/p>\n

Former Fed Leaders Speak Up<\/strong><\/h2>\n

In an unprecedented move,<\/strong>\u00a0four former Fed members have published an open letter<\/strong>\u00a0in the\u00a0Wall Street\u00a0<\/a>Journal calling\u00a0for\u00a0the independence of the central bank to be maintained<\/strong>.<\/p>\n

The four signatories were\u00a0former Chairmen Paul Volcker, Alan Greenspan, Ben Bernanke, and Janet Yellen.<\/strong><\/p>\n

The letter comes in the face of ongoing criticism from President Trump of the Fed. And, as a result, growing concerns regarding the independence of the Fed.<\/p>\n

The Letter<\/strong><\/h2>\n

The letter reads:<\/p>\n

\u201cAs former chairs of the board of governors of the Federal Reserve System, we are united in the conviction that the\u00a0Fed and its chair must be permitted to act independently<\/strong>\u00a0and in the best interests of the economy, free of short-term political pressures and, in particular,\u00a0without the threat of removal or demotion of Fed leaders for political reasons.<\/strong><\/p>\n

Collectively, we\u00a0served our nation across nearly 40 years<\/strong>\u00a0and were appointed and reappointed by six presidents, both Republican and Democratic. Each of us had to make difficult decisions to help guide the economy toward the Fed\u2019s legislated goals of maximum employment and stable prices. In retrospect, not all our choices were perfect. But we believe\u00a0those decisions were better for being the product of nonpartisan, nonpolitical assessments based on analysis of the longer-run economic interests of U.S. citizens<\/strong>\u00a0rather than being motivated by short-term political advantage.<\/p>\n

The Fed\u2019s nonpartisan status doesn\u2019t mean it is unaccountable.\u00a0Congress sets the Fed\u2019s powers and charges it with maximizing employment and promoting stable prices.<\/strong>The chair and other Fed leaders testify before Congress and speak regularly in public, explaining their views of the economy and how they plan to meet their mandates. Presidents, members of Congress, financial-market participants, pundits and many private citizens advocate that the Federal Reserve make particular monetary policy decisions.\u00a0In our system of government, that is the right and privilege of every person, one we don\u2019t question.<\/strong>\u00a0The Fed welcomes open dialogue, as evinced by the \u201cFed Listens\u201d program, in which Fed leaders have engaged with the public about possible changes to the Fed\u2019s policy framework.\u00a0A robust public debate helps make monetary policy better.<\/strong><\/p>\n

History, both here and abroad, has shown repeatedly, however, that an economy is strongest and functions best when the central bank acts independently of short-term political pressures<\/strong>\u00a0and relies solely on sound economic principles and data. Examples abound of political leaders calling for the central bank to implement a monetary policy that provides a short-term boost to the economy around election time. But research has shown that monetary policy based on the political (rather than economic) needs of the moment leads to worse economic performance in the long run, including higher inflation and slower growth.\u00a0Even the perception that monetary-policy decisions are politically motivated, or influenced by threats that\u00a0<\/strong>policy makerswon\u2019t be able to serve out their terms of office, can undermine public confidence that the central bank is acting in the best interest of the economy.<\/strong>\u00a0That\u00a0can lead to unstable financial markets and worse economic outcomes.\u201d<\/strong><\/p><\/blockquote>\n

Will Trump Intervene?<\/strong><\/h2>\n

The timing of this letter is interesting. Speculation has increased lately regarding potential US currency intervention thanks to Trump\u2019s ongoing criticism of the Fed.<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

Trump has publicly criticized both the central bank and Chairman Powell personally on several occasions. His main call has been for the Fed to help weaken the dollar.<\/p>\n

More recently, there has been talk of Trump taking matters into his own hands. White House adviser Larry Kudlow told CNBC that although it had been discussed, currency intervention had been ruled out.<\/p>\n

However, Trump then took to Twitter to refute that statement. The President reaffirmed that they had not ruled out intervention, leaving the market in limbo.<\/p>\n

China Weakens CNH<\/strong><\/h2>\n

China has just weakened its currency against the USD to its lowest level since the GFC in 2008. In light of this, the prospect of US currency intervention is likely to come up once again.<\/p>\n

Trump has been facing increased criticism recently over his approach to the Fed.<\/p>\n

The central bank\u2019s outlook and assessment have shifted dramatically this year. Expectations of rate hikes earlier in the year have transformed into\u00a0rate cuts as we saw at the July meeting.<\/a>\u00a0In light of this, there are clear concerns over the role the President might have played in this shift.<\/p>\n

Technical Perspective<\/strong><\/h2>\n

\"\"<\/a><\/p>\n

The weakening in CNH has seen USD rallying up to highs of 7.13905, levels not seen since 2008. While above the key 7 level, focus remains on further upside in the near term. However, we are seeing some retracement today. The move above 7 is a major development and the risk of US currency intervention is high. To the downside, support comes in at the 7 level with 6.8982 below, where we also have the rising trend line from 2018 lows.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex Former Fed Leaders Speak Up In an unprecedented move,\u00a0four former Fed members have published an open letter\u00a0in the\u00a0Wall Street\u00a0Journal calling\u00a0for\u00a0the independence of the central bank to be maintained. The four signatories were\u00a0former Chairmen Paul Volcker, Alan Greenspan, Ben Bernanke, and Janet Yellen. The letter comes in the face of ongoing criticism from President […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-152946","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/152946","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=152946"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/152946\/revisions"}],"predecessor-version":[{"id":152950,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/152946\/revisions\/152950"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=152946"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=152946"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=152946"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}