There has been a lot of news recently about the Federal Reserve, tariffs, and their impact on the economy. Recently, President Trump stated that he does not intend to fire the Fed Chairman, which is good news for markets. The market values the Fed’s relative independence, even if it doesn’t always agree with its decisions.
There is also a Supreme Court case underway regarding the President’s authority to remove the heads of various federal agencies. Some have speculated this could lead to an attempt to fire the Fed Chairman. However, the Solicitor General’s filing with the Court makes it clear that the Federal Reserve is a special case with a unique historical pedigree, stating: “That question is not at issue here.” The case specifically concerns agencies where “the President would lose control of critical parts of the Executive Branch for a significant portion of his term.” While we will see how broadly the Court interprets this authority, it seems unlikely it will extend to the independent Federal Reserve.
On another front, the President’s tariff policies have created volatility in the markets. It’s less of a settled policy and more of an ongoing negotiation. If these negotiations were to result in a prolonged trade war, that would likely be harmful to the global economy. However, if they lead to reduced trade barriers and a revitalized U.S. manufacturing sector, it could be positive for all involved. Until agreements are finalized and honored, market volatility is likely to continue.
If this volatility is giving you some indigestion, it’s a good idea to consider keeping some of your funds in a secure, FDIC-insured institution – especially funds you may need within the next few years. We recently introduced a 90-day CD option for those who want a competitive yield while maintaining short-term liquidity. Reach out to our team if you’d like to learn more!
Sincerely,
Clinton Gerst
Last Best Bank® President