The Federal Reserve has to manage two power relations: With Donald Trump and with financial markets

The Federal Reserve is involved in two power relations , from which it can emerge as dominated or as dominant: With Donald Trump, who calls for drastic rate cuts that are not necessary for the time being , given the US economic situation; With financial markets, which expect a significant cut in Fed Funds. If the Federal Reserve chooses a dominated position, it will cut its rates sharply and take the risk of giving rise to a moral hazard: Donald Trump will be able to conduct dangerous economic policies (protectionism) for growth , believing that monetary policy will boost growth; financial markets will believe it is sufficient to expect a rate cut for it to materialise. If the Federal Reserve chooses a dominant position, and refuses to give in to Donald Trump and financial markets, it will take the risk of a conflict with the White House and a significant correction in financial markets ( rising long-term interest rates, fall ing share prices). Perhaps it will choose an intermediate position, which would create a sense of ambiguity.