Powell’s Hawkish Message Can Be Sent Beforehand as Yellen Implies

Yellen noted in an activity that Bidens economic stimulus has boosted the economic growth but interest rates should be increased to prevent the economy from overheating. The U.S. bond yields embraced a rise whereas technology stocks suffered a plummet in the wake of her comment, followed by her view that inflation was not an economic puzzle, and prices only saw the transient growth. Yellen said that she would not predict nor recommend the interest-rate hikes, indicating the independence of the Federal Reserve (Fed). Her opinions have been instantly focused on by the financial market where the majority believe that the Fed will be forced to increase interest rates in advance.

Traditionally, the chair of the Fed is definitely a heavyweight in the global financial community whereas Yellen has totally replaced Powell as a leading role in the field. The reason for this is nothing but her proven capacity as the previous chair of the Fed. From my personal view, it is uncommon for her to give voice to offsetting inflation through interest-rate hikes, which shows her intention to obviously impose pressure on Powell. In my opinion, Biden and Yellen are not satisfied with Powells competence because he has expressed his lack of confidence in the prospect of the U.S. economy several times since Biden took office, which apparently demonstrates that Powell is not confident in his new boss even disgraces the president. The American economy has boasted a strong performance with inflation intensifying recently but Powell clings to the dovish message, an indication of his imprudence of the impending inflation.

As far as I can see, it is most likely that Powell has deliberately released the dovish message to suppress USD because he is still apt to weaken USD as Trump‘s policy did, which was, however, denied by Yellen when she came into office. She notices the growing crisis of confidence in USD which is proved by the fact that many countries have reduced the impact of USD by eliminating dollarization. In this case, the U.S. financial community will see a calamity and the role of USD as the international unit of currency will be rocked if the world loses faith in it. From Yellen’s perspective, monetary policies proposed by Powell are harmful to USD even intentionally depreciate the currency, which is opposite to Bidens intention. Therefore, she has struck up an entirely different tune.

Yellen‘s speech this time must have exerted an influence on policy-makers of the Fed. It is believed that Powell may change his mind to cooperate with her amid his upcoming speeches. If he still deliberately sends out the dovish message, Biden’s administration is believed to force him to retire and have candidates lined up for the chair of the Fed. However, Powell will be hard to obtain reappointment even though his message turns to be hawkish. He is absolutely incompetent at the chair of the Fed, an arduous position with heavy responsibilities, because he is totally from Trump‘s camp on one hand, and Biden and Yellen need a competent chair of the Fed instead of an obedient official to cooperate with them in the economic stimulus with an aim of keeping the leading role played by the U.S. economy in the world on the other hand. If the financial market hypes rumors of Powell’s possible retirement, it is estimated that this news will be extremely conducive to USD.