USD: A good central banker is like whipped cream

📆 7/18/2024 5:33 AM

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Fed, Macroeconomics, Banks

📆 7/18/2024 5:33 AM
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There is probably a broad consensus in the market that a second Trump term would be inflationary.

I don't need to repeat the arguments here. You can find themeverywhere. But what does this statement mean for USD exchange rates? The answer is: it depends on the Fed eral Reserve's monetary policy, Commerzbank FX analysts Ulrich Leuchtmann and Michael Pfister note. The Fed is to resist Trump’s pressure to be USD-positive “Politicians cannot resist the temptation to use the money printing machine to finance policies that they consider desirable.

” “Wim Duisenberg, who later became the first president of the ECB, said of the Bundesbank that it was like whipped cream: the more you beat it, the stiffer it gets. Central banks should get stiffer under political pressure, should resist it. In doing so, they achieve two things: the politicians who exerted pressure achieve the opposite and will think twice in the future before repeating their disrespectful behavior; the public sees that the central bank is independent.

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