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If Trump Can Strong-Arm the Fed, U.S. Assets May Not Be So Great

  • Dollar may weaken as desired, but Fed credibility may be hit
  • Long-term yields at risk of rising on inflation concerns
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Economy, Not Trump, Will Steer Fed's Rate Path, Winter Says
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Donald Trump may want to watch what he wishes for. If Federal Reserve boss Jerome Powell does what the president wants, American assets could lose their appeal as a global haven.

Strategists warn that more than just the central bank’s credibility would be hurt if the Fed were to put the brakes on monetary policy tightening. Trump would get his desire for a weaker dollar, but rising inflation expectations would dent the perceived safety of U.S. assets and eventually boost longer-term financing costs for the government and American consumers. On the other hand, global liquidity and growth could receive a lift, at least initially, and emerging markets that have been maligned by Trump could benefit.