Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Trump’s Fed Tweets Shown to Have ‘Significant’ Effect on Trading

Published 09/23/2019, 03:36 AM
Updated 09/23/2019, 05:42 AM
Trump’s Fed Tweets Shown to Have ‘Significant’ Effect on Trading

Trump’s Fed Tweets Shown to Have ‘Significant’ Effect on Trading

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. 

President Donald Trump’s Twitter attacks on the Federal Reserve are prompting investors to bet the central bank will bow to political pressure and lower interest rates, according to a new study.

Trump has frequently used social media to criticize the Fed and Chairman Jerome Powell for running rates higher than he thinks they should be. A review of such tweets and the market response by economists from Duke University and the London Business School found they have a “statistically significant and negative effect” on markets.

The broadsides knocked a combined 10 basis points off the expected fed funds futures contract, the equivalent to about 0.30 basis points per Tweet, the study found.

“We provide evidence that market participants believe that the Fed will succumb to the political pressure from the President, which poses a significant threat to central bank independence,” Francesco Bianchi, Thilo Kind and Howard Kung said in a study published on Monday by the National Bureau of Economic Research.

The finding will likely disappoint the Fed, whose officials have long argued they don’t take Trump’s lobbying into account when setting monetary policy and that they act independently of politics.

Just last week, the president accused the Fed of having “No ‘guts,’ no sense, no vision!” despite it just having cut rates for the second time this year.

Trump also recently asked whether Powell or China’s president, Xi Jinping, was “our bigger enemy.” In August, he pointed to Germany’s sale of debt with negative yields to criticize Powell, saying the Fed board “puts us at a disadvantage against our competition.” He’s also questioned “Where did I find this guy Jerome?” despite being the one to nominate him.

Latest comments

The FED has been forced to buy Govt debt since the 30's. How are they independent?
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.