U.S. President Donald Trump's renewed calls for Federal Reserve Chair Jerome Powell's resignation have prompted investors to protect portfolios against the risk of higher inflation, as a central bank more willing to lower interest rates could fuel price rises and make lenders demand higher compensation to hold bonds.
While the effects of a Fed chief being more friendly to cutting rates could be mixed for equities in the short term, it would translate into a weaker U.S. dollar, increased volatility in the Treasurys market and higher longer-term rates, meaning more expensive borrowing costs for mortgages and corporate bonds.
Since returning to the White House in January, Trump has repeatedly railed against the Powell-led Fed for not cutting interest rates, feeding concerns that Trump aims to put the Fed under his thumb.
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