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    Stephen Colbert on Trump’s Epstein controversy: ‘Desperately looking for a scapegoat’

    Late-night hosts dig into Donald Trump’s growing anxiety over the Jeffrey Epstein files and his beef with the Federal Reserve chair, Jerome Powell.Stephen ColbertOn Thursday evening, Stephen Colbert announced that the Late Show would end in May 2026, owing to a decision by the CBS parent company, Paramount. Though Paramount said the decision was “purely financial”, the cancellation comes just three days after Colbert openly criticized the company for settling a lawsuit with Donald Trump for $16m.The settlement coincided with Paramount seeking approval from the Trump administration for an $8.4bn merger with Skydance Media. Colbert called the settlement “a big fat bribe”.In a separate message to viewers on Thursday, Colbert said he was informed of the decision the night before. “Yeah, I share your feelings,” he said as the audience booed.“It’s not just the end of the show, it is the end of the Late Show on CBS. I’m not being replaced, this is all just going away,” he added. “Let me tell you, it is a fantastic job. I wish someone else was getting it. And it is a job I am looking forward to doing with this usual gang of idiots for another 10 months.”During his monologue, Colbert focused on the Jeffrey Epstein controversy consuming the White House, and “causing so much trouble for Trump that he recently ordered it to be put in a cell and for the cameras to stop working for three minutes”.“Maga is furious because they think Trump is refusing to release the Epstein files,” he explained. “In response, Trump has been saying that there are no credible files, and if there are, they’re really boring, and also Obama made them up.“That part is true, and you can read them on Obama’s annual summer Epstein client list,” he joked.“As crazy as it is, Trump is going all in on the idea that his followers have fallen for a nefarious Democratic scheme.” As Trump said in the Oval Office on Wednesday: “Certain Republicans got duped by the Democrats, and they’re following the Democrat playbook.”“That is ridiculous – the Democrats have never had a playbook,” Colbert joked. “It’s improv, baby!“Trump is desperately looking for a scapegoat,” so on Wednesday, he fired the Manhattan prosecutor who handled the Epstein case and “pulled the Uno reverse card”, calling on the FBI to investigate “this Jeffrey Epstein hoax”.“By which he evidently means he wants the FBI to investigate the folks who investigated Jeffrey Epstein’s sex trafficking,” Colbert said, “which is weird, but we could get a whole new spinoff of To Catch a Predator.”Seth MeyersTrump “is under a lot of pressure from all this Epstein stuff. Even his most devoted supporters are trashing him and demanding answers,” said Seth Meyers on Thursday’s Late Night before clips of numerous Republicans demanding answers and even calling for an independent special counsel.In an interview with a far-right media network, Trump called the Epstein files a “scam” that’s “all put out by Democrats, some of the naive Republicans fall right into line like they always do”.“Fall in line with what?” an exasperated Meyers asked. “Democrats didn’t say a word. Your own supporters are the ones who spent years demanding the files and obsessing over the Epstein case, which was a very real criminal case involving a very real person, and now you’re the one fanning the flames of the conspiracy by calling it all a hoax. I swear we’re like a day away from Trump claiming Jeffrey Epstein was never even a real person.”Meyers also homed in on the far-right interviewer who validated Trump with “they definitely set the Republicans up.”“Set them up how?!” he implored. “We’ve been asking this question all week: how did they set up the Republicans? They made up fake Epstein files, then kept those fake files secret, then convinced the entire Maga base to spend years demanding the release of those files, then knew they would lose the election to Trump, who would then refuse to release the files they made up? You people all need to take a fucking dementia test.”The Daily Show“We all know President Trump has spent the last two weeks in a wrestling match with the ghost of Jeffrey Epstein,” said Jordan Klepper on the Daily Show. “But he’s been fighting the last six months with a much more alive person: Federal Reserve chairman Jerome Powell. And boy does Trump hate the guy.”Klepper played a series of clips in which Trump called Powell a “stupid person”, an “average, mentally, person. I’d say low at what he does” and a “numbskull … you talk to the guy and it’s like talking to nothing. It’s like talking to a chair.”“Yeah! Whatever happened to all of our exciting, dynamic Federal Reserve chairs?” Klepper joked.“The way Trump talks about him, you’d think they caught him at a Coldplay concert with Trump’s wife,” he added. “But at its heart, this is a beef about economics. Trump wants to lower interest rates to help juice the economy, but Jerome Powell is in charge of setting those interest rates, and he refuses to lower them because he’s worried that will increase inflation. And nothing, nothing makes Trump angrier than someone doing their job well.”In another clip, Trump blasted Joe Biden for nominating Powell. Except … Klepper cut to a clip of Trump nominating Powell in 2017, calling him “strong,” “committed” and “smart”.“Damn, Joe Biden looks fat as shit,” Klepper joked. “But also, I get it. I’m also trying desperately to forget everything that happened during Trump’s first term.” More

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    Trump takes on the Fed – but he has little power over central bank, economists say

    For months, Donald Trump has ranted on social media and, at one point, threatened to fire the Federal Reserve chair, Jerome Powell. Last week, he took on a new, unusual tactic: a handwritten note.“You have cost the USA a fortune and continue to do so. You should lower the rate – by a lot!” Trump wrote to Powell, whom he calls “Too Late” in one of his less compelling nicknames.That Trump has targeted the Fed isn’t surprising. In the midst of Trump’s trade war, consumers and business owners alike have expressed anxiety about the economy. The stock market tanked in April, when the president announced the highest of his tariffs, and only went on the upswing when he pulled back the bulk of his levies.The Fed has the ability to sway the US economy through its ability to adjust interest rates. When rates are high, as they have been for the last few years, borrowing money becomes more expensive. This means higher rates for mortgages, business loans, credit card debt and more. People are less likely to invest when interest rates are high, which can slow activity in the economy. The Fed lowering interest rates would excite investors and spur economic activity, but the price could be steep in the long run.But how much sway does Trump really have over the Fed?While Trump’s aggression toward the Fed, particularly his personal attacks against Powell, are a remarkable departure from the relationship a US president typically has with the Fed, economists say the structure of the central bank limits the amount of power Trump actually has – at least in the short term.Historically, the Fed has been a nonpartisan, independent central bank within the federal government. Economists have found that countries without central banks are prone to high inflation and unemployment.“A central bank’s independence is pretty much the only thing macroeconomists know of that’s a free lunch,” said Jason Furman, a former economic adviser to Barack Obama. “When you look at authoritarian leaders that have effectively taken over the central banks, like in Turkey, you can end up with 70% inflation rates and really, really big economic problems.”In late June, Trump told reporters that he has zeroed in on “three or four people who I’m going to pick” to replace Powell. When the treasury secretary, Scott Bessent, whose name has been floated, was asked if he would take the job, Bessent said: “I will do what the president wants.”That the White House is already talking about replacing Powell almost a year out from the end of his term has raised concerns that a new appointee would act as Trump’s “shadow chair”, or someone who has power over Powell before he leaves office.But those familiar with the Fed’s structure say that a powerful “shadow chair” is unlikely, especially since the Fed’s structure encourages consensus among its leaders.When setting interest rates, the Fed chair doesn’t act alone. The chair is one of 12 members of the Federal Open Market Committee (FOMC), which meets eight times a year to vote on any adjustments to the interest rate.The amount of control Trump has over who gets on to the FOMC is limited. The committee has seven Fed governors who serve 14-year terms. Those governors are appointed by the president and confirmed by the Senate. The other five members are presidents of regional Federal Reserve banks, who are selected within the Federal Reserve system.During the next four years, because of upcoming term limits, Trump will have the ability to appoint two of the 12 members of the FOMC – what would be a small fraction of the committee.“They’re going to have a hard time persuading other people on the committee to go along with anything like what Trump wants,” Furman said.skip past newsletter promotionafter newsletter promotionRyan Sweet, chief US economist for Oxford Economics, said that Fed governors on the FOMC already voice dissenting views on the economy in public, but come together to form a consensus during their meetings.“It’s built [into the Fed] that they go into a meeting and they’ve got to come to a consensus on what the outcome is,” Sweet said.And even though Trump may want to replace Powell before his term is up, the supreme court signaled that the president can’t constitutionally fire him. Sweet pointed out that the court’s preemptive protection of the Fed chair has likely soothed stock markets, which had gone into a panic when Trump first threatened to oust Powell.Powell, whom Trump first appointed in 2018, has publicly resisted the president’s efforts to sway the Fed. He has said he would not step down if Trump asks and has said the Fed will not lower interest rates prematurely, at risk of raising inflation.In his most pointed statement against Trump’s economic policies, Powell said that the Fed paused interest rate cuts “when we saw the size of the tariffs”.“Essentially all inflation forecasts for the United States went up materially as a consequence of tariffs,” Powell said. “We didn’t overreact, in fact we didn’t react at all.” This article was amended on 7 July 2025. Powell said the Fed paused interest rate cuts due to Trump’s tariffs, not interest rate increases. More

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    Federal Reserve issues rare statement asserting independence amid Trump pressure

    The Federal Reserve issued a rare, strongly worded statement on Thursday after chair Jerome Powell spoke with Donald Trump at the White House on Thursday morning, holding firm on the central bank’s independence amid pressure from Trump to lower interest rates.The three-paragraph statement emphasized the Fed’s independent, non-partisan role in setting monetary policy based on economic data.“Chair Powell did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook,” the statement read.Powell told Trump that he and other Fed officials “will set monetary policy, as required by law, to support maximum employment and stable prices and will make those decisions based solely on careful, objective, and non-political analysis”, according to the statement.That the Fed, which tends to be extremely reserved with public statements, issued the brief memo shows that officials are aware of Trump’s pressure campaign and are standing firm on the Fed’s independence.At Thursday’s White House press briefing, press secretary Karoline Leavitt said that the Fed’s statement is “correct” but that Trump “did say that the Fed chair is making a mistake by not lowering rates”.Historically, presidents show deference to the Fed, respecting the central bank’s independence. But over the last few months, Trump has tried to publicly pressure Powell to lower interest rates, as the Fed did last year, though officials say that the economy – thrown into a tailspin from Trump’s trade war – has become too unstable to continue lowering rates.After Trump’s “liberation day” in early April, when he announced a slate of tariffs that ended up crashing US stock markets, Trump wrote on social media: “This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always ‘late,’ but he could now change his image, and quickly.”Powell, who was appointed during Trump’s first term in 2018, has resisted the pressure from Trump and has warned that high tariffs could lead to inflation and, earlier in May, said that officials are “in no hurry” to cut interest rates – all statements that seem to have put Trump on edge.“‘Too Late’ Jerome Powell is a FOOL, who doesn’t have a clue,” Trump wrote after the Fed’s meeting.Trump had previously threatened to fire Powell, though it’s unclear whether the president has the power to do so. Last week, the supreme court allowed Trump to follow through on his dismissal of officials on the National Labor Relations Board, the panel that oversees labor disputes, but judges noted that the Federal Reserve is a “uniquely structured, quasi-private entity” – implying that it likely won’t be so easy for Trump to get rid of Powell. More

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    Federal Reserve warns of inflation and jobs risks amid Trump’s erratic trade strategy

    The Federal Reserve kept interest rates on hold and called out growing dangers in the US economy amid Donald Trump’s erratic rollout of an aggressive trade strategy.Jerome Powell, the US central bank’s chair, cautioned that the president’s tariffs were likely to raise prices, weaken growth and increase unemployment if maintained.Fed policymakers cautioned that “the risks of higher unemployment and higher inflation have risen” as they opted to maintain the benchmark interest rate for the third time in a row. “Uncertainty about the economic outlook has increased further,” they said in a statement.With inflation expectations – how consumers think prices will move – rising,Powell, the Fed chair, said the “driving factor” appeared to be Trump’s tariffs.At a press conference, he said: “If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.”The US president has repeatedly demanded in recent months that the Fed cuts rates – and even raised the prospect of firing Powell, before walking back the comments – as Trump’s tariffs plan appeared to knock the US economy.The Fed has been sitting on its hands for months, however, citing heightened uncertainty. It last cut rates in December, to a range of between 4.25% and 4.5%.As Trump pushed ahead last month with sweeping tariffs on imported goods from much of the world, Powell cautioned this would probably raise prices and slow growth – despite the administration’s pledges to revitalize the US economy and reduce the cost of living for millions of Americans.US gross domestic product (GDP) shrank for the first time in three years during the first quarter, raising fears of recession as Trump’s tariffs – and threats of tariffs – cast a shadow over the world’s largest economy.Asked whether he was trying to take responsibility for stronger parts of the economy, while blaming his predecessor, Joe Biden, for any sign of weakness, Trump told NBC’s Meet The Press: “I think the good parts are the Trump economy, and the bad parts are the Biden economy. Because he’s done a terrible job.”After Fed policymakers finished their latest two-day meeting on Wednesday, the central bank reiterated in its statement that they would “carefully assess incoming data, the evolving outlook, and the balance of risks” ahead of future meetings.Its callout of greater risks in the US economy amounted to “a thinly veiled critique of the new administration’s import tariffs”, said Samuel Tombs, chief US economist at Pantheon Macroeconomics, “and represents an assertion of independence”.Addressing reporters after the meeting, Powell said he could not provide a timeframe for rate cuts. “We are going to need to see how this evolves,” he said. “There are cases in which it would be appropriate for us to cut rates this year. There are cases in which it wouldn’t. And we just don’t know.”While concern over the economic outlook is mounting, Powell stressed there had been no “big economic effects” in the data so far. “People, they are worried now about inflation, they are worried about a shock from the tariffs,” he said. “But they really haven’t – that shock hasn’t hit yet.”Asked how Trump’s demand for rate cuts affected the Fed’s latest decision, and the difficulty of his job, Powell responded bluntly. “Doesn’t affect doing our job at all,” he said.He reserved perhaps his briefest response for when a reporter asked what he thought when Trump said last month he had “no intention” of firing him – days after saying his termination could not come fast enough. “I don’t have anything more for you on that,” said Powell. More

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    The uniting theme of Trump’s presidency? Ineptitude | Robert Reich

    Some Democrats fear they’re playing into Donald Trump’s hands by fighting his mass deportations rather than focusing on his failures on bread-and-butter issues like the cost of living.But it’s not either-or. The theme that unites Trump’s inept handling of deportations, his trampling on human and civil rights, his rejection of the rule of law, his dictatorial centralization of power, and his utterly inept handling of the economy is the ineptness itself.In his first term, not only did his advisers and cabinet officials put guardrails around his crazier tendencies, but they also provided his first administration a degree of stability and focus. Now, it’s mayhem.A sampling from recent weeks:1. The Pete Hegseth disaster. The defense secretary didn’t just mistakenly share the military’s plans with the editor of the Atlantic; we now know he shared them with a second Signal group, including his wife, brother and personal lawyer.He’s a walking disaster. John Ullyot, who resigned last week as Pentagon spokesperson, penned an op-ed in Politico that began: “It’s been a month of total chaos at the Pentagon.” Last Friday, Hegseth fired three of his senior staffers. His chief of staff is leaving. As Ullyot wrote, it’s “very likely” that “even bigger bombshell stories” will come soon. The defense department “is in disarray under Hegseth’s leadership”.It’s not just the defense department. Much of the federal government is in disarray.2. The Harvard debacle. A Trump official is now claiming that a letter full of demands about university policy sent to Harvard on 11 April was “unauthorized”. What does this even mean?As Harvard pointed out, the letter “was signed by three federal officials, placed on official letterhead, was sent from the email inbox of a senior federal official and was sent on April 11 as promised. Recipients of such correspondence from the US government – even when it contains sweeping demands that are astonishing in their overreach – do not question its authenticity or seriousness.”Even though it was “unauthorized”, the Trump regime is standing by the letter, which has now prompted Harvard to sue.3. The tariff travesty. No sooner had Trump imposed “retaliatory” tariffs on almost all of the US’s trading partners – based on a formula that has made no sense to anyone – than the US stock and bond markets began crashing.To stop the selloff, Trump declared a 90-day pause on the retaliatory tariffs but raised his tariffs on China to 145% – causing markets to plummet once again.Presumably to stem the impending economic crisis, he declared an exemption to the China tariffs for smartphones and computer equipment. By doing so, Trump essentially admitted what he had before denied: that importers and consumers bear the cost of tariffs.Now, Trump is saying that even his China tariffs aren’t really real. Following warnings from Walmart, Target and Home Depot that the tariffs would spike prices, Trump termed the tariffs he imposed on China “very high” and promised they “will come down substantially. But it won’t be zero.”Markets soared on the news. But where in the world are we heading?4. The attack on the Fed chair fiasco. When Trump renewed his attacks on Jerome H Powell, the chair of the Federal Reserve – calling him “a major loser” and demanding that the Fed cut interest rates – Trump unnerved already anxious investors who understand the importance of the Fed’s independence and feared that a politicized Fed wouldn’t be able to credibly fight inflation.Then, in another about-face, Trump said on Wednesday he had “no intention” of firing Powell, which also helped lift markets.An economy needs predictability. Investors won’t invest, consumers won’t buy, and producers won’t produce if everything continues to change. But Trump doesn’t think ahead. He responds only to immediate threats and problems.Who’s profiting from all this tumult? Anyone with inside knowledge of what Trump is about to do: most likely, Trump and his family.5. The Kilmar Ábrego García calamity. After the Trump regime admitted an “administrative error” in sending Ábrego García to a brutal Salvadoran torture prison, in violation of a federal court order, Trump then virtually ignored a 9-0 supreme court order to facilitate his return.To the contrary, with cameras rolling in the Oval Office, Trump embraced Nayib Bukele – who governs El Salvador in a permanent state of emergency and has himself imprisoned 83,000 people in brutal dungeons, mostly without due process. Trump then speculated about using Bukele’s prisons for “homegrown” (ie, American-born) criminals or dissidents.Meanwhile, after the Trump regime deported another group of immigrants to the Salvadoran prison under a rarely invoked 18th-century wartime law, the supreme court blocked it from deporting any more people under the measure.6. Ice’s blunderbuss. Further illustrating the chaos of the Trump regime, immigration officials have been detaining US citizens. One American was held by Immigration and Customs Enforcement (Ice) in Arizona for 10 days until his relatives produced papers proving his citizenship, because, according to his girlfriend’s aunt, Ice didn’t believe he was American.Last week, the Trump regime abruptly took action to restore the legal status of thousands of international students who had been told in recent weeks that their right to study in the United States had been rescinded, but officials reserved the right to terminate their legal status at any time. What?Freedom depends on the rule of law. The rule of law depends on predictability. Just like Trump’s wildly inconsistent economic policies, his policies on immigration are threatening everyone.7. Musk’s ‘Doge’ disaster. Musk’s claims of government savings have been shown to be ludicrously exaggerated.skip past newsletter promotionafter newsletter promotionRemember the claim that taxpayers funded $50m in condoms in Gaza? This was supposed to be the first big “gotcha” from the so-called “department of government efficiency” (Doge), but as we know now, it was a lie. The US government buys condoms for about 5 cents apiece, which means $50m would buy 1bn condoms or roughly 467 for every resident of Gaza. Besides, according to a federal 2024 report, the US Agency for International Development (USAID) didn’t provide or fund any condoms in the entire Middle East in the 2021, 2022 or 2023 fiscal years.Then there have been the frantic callbacks of fired federal workers, such as up to 350 employees at the National Nuclear Security Administration who work on sensitive jobs such as reassembling warheads. Four days after Doge fired them, the agency’s acting director rescinded the firings and asked them back. Similar callbacks have occurred throughout the government.Trump and Musk are threatening the safety and security of Americans – for almost no real savings.8. Measles mayhem. As measles breaks out across the country, sickening hundreds and killing at least two children so far, Trump’s secretary for health and human services, Robert F Kennedy Jr, continues to claim that the measles vaccine “causes deaths every year … and all the illnesses that measles itself causes, encephalitis and blindness, et cetera”.In fact, the measles vaccine is safe, and its risks are lower than the risks of complications from measles. Most people who get the measles vaccine have no serious problems from it, the CDC says. There have been no documented deaths from the vaccine in healthy, non-immunocompromised people, according to the Infectious Diseases Society of America.Kennedy also says: “We’re always going to have measles, no matter what happens, as the [measles] vaccine wanes very quickly.” In fact, the measles vaccine is highly protective and lasts a lifetime for most people. Two doses of the vaccine are 97% effective against the virus, according to the CDC and medical experts worldwide. The US saw 3m to 4m cases a year before the vaccine. Today it’s typically fewer than 200.9. Student debt snafu. After a five-year pause on penalizing borrowers for not making student loan payments, the Trump regime is about to require households to resume payments. This could cause credit scores to plunge and slow the economy.Many of the households required to resume paying on their student loans are also struggling with credit card debt at near-record interest rates and high-rate mortgages they thought they would be able to refinance at a lower rate but haven’t. Instead of increasing education department staffing to handle a work surge and clarifying the often shifting rules of its many repayment programs, the Trump regime has done the opposite and cut staff.10. Who’s in charge? In the span of a single week, the IRS had three different leaders. Three days after Gary Shapley was named acting commissioner, it was announced that the deputy treasury secretary, Michael Faulkender, would replace Shapley. That was the same day, not incidentally, that the IRS cut access to the agency for Doge’s top representative.What happened? The treasury secretary, Scott Bessent, told Trump that Musk had evaded him to install Shapley.Meanwhile, the Trump regime is cutting the IRS in half – starting with 6,700 layoffs and gutting the division that audits people with excessive wealth. These are the people meant to keep billionaires accountable. Without them, the federal government will not take in billions of dollars owed.At the same time, the trade adviser Peter Navarro has entered into a public spat with Musk, accusing him of not being a “car manufacturer” but a “car assembler” because Tesla relies on parts from around the world. This prompted Musk to call Navarro a “moron” and “dumber than a sack of bricks” in a post on X, later posting that he wanted to “apologize to bricks”.The state department has been torn apart by the firing of Peter Marocco, the official who was dismantling USAID, by Marco Rubio, the secretary of state. Career officials charged that Marocco, a Maga loyalist, was destroying the agency; Trump’s Maga followers view Marocco’s firing as a sign that Rubio is part of the establishment they want to destroy.Worse yet, Trump has fired more than a half-dozen national security officials after meeting with the far-right agitator Lara Loomer, who was granted access to the Oval Office and gave Trump a list of officials she deemed disloyal.Bottom line: no one is in charge. Trump is holding court but has the attention span of a fruit fly. This is causing chaos across the federal government, as rival sycophants compete for his limited attention.Incompetence is everywhere. The regime can’t keep military secrets. It can’t maintain financial stability. It can’t protect children from measles. It cannot protect America.While we need to continue to resist Trump’s authoritarianism, we also need to highlight his utter inability to govern America.

    Robert Reich, a former US secretary of labor, is a professor of public policy emeritus at the University of California, Berkeley. He is a Guardian US columnist. His newsletter is at robertreich.substack.com More

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    The Guardian view on the IMF’s warning: Donald Trump could cost the world a trillion dollars | Editorial

    Wake up! When the most sober of global institutions, the International Monetary Fund, abandons its usual technocratic calm to sound the alarm on the political roots of global financial instability, it’s time to pay attention. The IMF is warning of a non-negligible risk of a $1tn hit to global output, as Donald Trump’s erratic “America first” agenda – part oligarchic enrichment scheme, part mobster shakedown – collides with a perfect storm of global financial vulnerabilities.Such a shock would be equivalent to a third of that experienced in the 2008 crisis. But it would be felt in a much more fragile and politically charged environment. This time, the crisis stems not just from markets but from the politics at the heart of the dollar system. The IMF’s latest Global Financial Stability Report sees the danger in Mr Trump’s trade policies, especially his “liberation day” announcements, which have pushed up America’s effective tariff rate to the highest in over 100 years.The IMF put investors on notice that Trumpian volatility was taking place as US debt and equities – especially tech stocks – were overvalued. It cautions that hedge funds have made huge bets that have gone sour, requiring them to sell US treasuries for cash and potentially deepening the chaos in bond markets. Ominously, the IMF draws the comparison, first made by the analyst Nathan Tankus, with the “dash for cash” in March 2020 during Covid, when the Federal Reserve rescued US treasury markets directly. Developing nations, already grappling with the highest real borrowing costs in a decade, may now be forced to take on even more expensive debt – the IMF warns – just to cushion the blow from Mr Trump’s new tariffs, risking a dreaded “sudden stop” in capital flows.At the heart of this chaos stands the US, the very country meant to uphold the global financial architecture. Just over a week ago, Adam Tooze of Columbia University wondered if markets had begun to “sell America” after US long-maturity bond prices fell precipitously. He thought that markets were no longer just responding to economic fundamentals but to politics as a systemic risk factor. In this case: Mr Trump’s tariff threats and his increasing political pressure on Fed’s chair, Jerome Powell. In essence, Prof Tooze gave us the theory; the IMF just confirmed the data.The US president’s continued attacks on the Fed chair over the weekend have only added to a flight from US equities, bonds and the dollar itself. The money is fleeing to safe havens such as gold. Some of the loss has been clawed back, but at what cost? Investors aren’t just jittery about inflation or growth – they’re hedging against political chaos. That might explain the seemingly divergent IMF messaging: blunt systemic warnings in its report versus the soothing market-facing comments from a senior official at the fund’s press conference. This is central bank diplomacy. The institution is signalling that it is worried while trying not to spark a self-fulfilling panic in treasuries and the dollar.The real concern here is not technical dysfunction in treasury markets or the mechanics of the Fed, which are the bedrock of the global financial system. It’s about the politicisation of the monetary-fiscal nexus under a Trumpian regime that is fundamentally hostile to the norms of liberal-democratic governance. When even the dollar is no longer a safe haven, what – or who – can be?Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. More

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    Trump says Fed chair would resign if asked and condemns him over interest rates

    Donald Trump early on Thursday condemned the Federal Reserve chair, Jerome Powell, for not lowering US interest rates, and expressed a wish for him to be gone from his role.The US president lambasted Powell as “always too late and wrong” in a post on his Truth Social platform. Trump noted that the European Central Bank (ECB) was poised on Thursday to lower interest rates again, without mentioning that the body has been responding to the chaos caused by Trump’s initiatives on tariffs.Addressing reporters later in the day, Trump claimed Powell would resign if he asked him to. Powell himself has said that he would not resign if asked to do so by the president.Trump has been pressuring Powell to cut US interest rates for months, even though the central bank is independent of the administration in setting monetary policy and the White House typically does not publicly lobby the Federal Reserve.The ECB had been expected to cut interest rates for the seventh time this year in order to prop up economic growth, and then did so not long before US markets were due to open. Powell enraged Trump on Wednesday night by warning that the president’s sweeping tariffs could raise inflation. That would make the Fed even more hesitant to cut interest rates.Christine Lagarde, the ECB president, in explaining the reasons why it has – unlike the Fed – cut interest rates, said “the economic outlook is clouded by exceptional uncertainty” because of Trump’s tariffs, which constitute a negative demand shock.Lagarde was speaking after cutting the ECB’s main deposit rate by 25 basis points to 2.25%.Europe had been preparing another interest rate cut following the global financial turmoil caused by Trump’s tariffs push, in which he has gone back and forth on whether, when and how deeply to tax imports from other countries, and on which countries, since he returned to the White House for a second term.He retreated sharply earlier this month from his decision to impose tariffs worldwide, pausing most of the charges for 90 days, although most notably not on China, after markets plunged and US government bonds – traditionally seen as one of the world’s safest financial assets – had suffered a dramatic sell-off. Wall Street chiefs and other experts also forecast a heightened likelihood of recession. Economists polled by Reuters on Thursday put US recession odds at 45%.After insisting for days that he would hold firm on his aggressive trade strategy, unveiled in full on 2 April, which he dubbed “liberation day”, Trump announced on 9 April that all countries that had not retaliated against US tariffs would receive a reprieve – and only face a blanket US tariff of 10% – until July.Powell on Wednesday said the US economy was well-positioned but added that Trump’s tariffs were likely to cause “at least a temporary rise in inflation. The inflationary effects could also be more persistent.”He indicated that the prospect of sweeping tariffs on virtually every trade partner could put the Fed in the unenviable position of having to choose between tackling inflation and unemployment.The World Trade Organization, meanwhile, warned that Trump’s tariffs would send international trade into reverse this year, depressing global economic growth.The International Monetary Fund (IMF) managing director, Kristalina Georgieva, said the global outlook was also weakening in the face of the Trump tariff onslaught, adding central banks like the Federal Reserve needed to remain agile and credible.“Resilience is being tested again – by the reboot of the global trading system,” she said.Trump also said as part of his Truth Social post at daybreak on Thursday that “Powell’s termination cannot come fast enough”. He dubbed him, further in the post, “Too Late” and put forward the argument that prices were coming down, from oil to eggs.Trump nominated Powell to become Fed chair during his first term in the White House, in 2018, and Joe Biden renominated him during his term in the White House, in 2022. The US Senate confirms the chair and the US president cannot terminate the head of the Federal Reserve before the end of their four-year fixed stints. Powell is in place until next spring.The US central bank has held interest rates steady at 4.25% to 4.5% since the start of this year.Trump said in his post: “The ECB is expected to cut interest rates for the 7th time, and yet, “Too Late” Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete “mess!” Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!”The New York Fed president, John Williams, spoke to Fox Business on TV on Thursday and backed up Powell’s wariness on rates.“I don’t see any need to change the setting of the Fed funds rate any time soon … It’s really about collecting information, understanding better what’s happening in the economy during the rest of this year, understanding kind of how the uncertainty plays out,” Williams said.Meanwhile, Politico, citing unnamed sources, reported after Trump’s post that the treasury secretary, Scott Bessent, had been cautioning White House officials against any attempt to fire Powell, for which there is no tested mechanism, saying it would risk destabilizing financial markets.And there was a fresh alarm bell sounded on the risk of stagflation, in which high inflation combines with high unemployment amid stagnant economic growth.“A sudden crystallization of the threat to Fed independence would both intensify market stress and shift it in more of a stagflationary direction with a sharp increase in tail risk,” Krishna Guha, vice-chair of an arm of the financial advisory firm Evercore ISI, said in a note.Reuters contributed reporting More