Ken Rogoff on Trump's Fed Chair Strategy and the High Dollar

Trump's Strategy for the Fed Chair

• 🎯 President Trump is reportedly frustrated with Fed Chair Jay Powell over interest rates, leading to a strategy of appointing a "shadow Fed chair."
• 🧠 Ken Rogoff, a Harvard economics professor, views this strategy as potentially painting the shadow Fed chair into a corner.
• ⚠️ If the nominee's actions don't align with Trump's desires (like a 1% interest rate), Trump could unnominate them.
• ⚖️ This tactic is compared to Trump's approach with Supreme Court justices, aiming for influence without direct control.

The Role of Jay Powell

• 💡 If Jay Powell does not step down from the Fed board after his potential term as chair, he could act as a "shadow chair from within the Fed."
• 🤝 If the rest of the Fed's open market committee respects Powell more than the new chair, they might follow Powell's lead.
• 📉 This scenario could lead to the Fed chair not controlling the board, as acknowledged by Treasury Secretary Bessant.

The US Dollar's Valuation

• 📈 Rogoff discusses the high valuation of the US dollar, noting it hasn't been this high since 2002 and 1985.
• 📉 In both previous instances, the dollar significantly depreciated over a couple of years.
• 🌎 Despite a 10% drop, the dollar remains high, making the US expensive for those in countries with lower inflation, like Japan.
• ⚡ While Trump's actions may have accelerated a trend, Rogoff believes the dollar's high valuation is a persistent issue that would likely continue even under a different president.