Will Vos not cut interest rates and "become a defendant"? Bessent refuses to make any promises: it all depends on Trump!

At the beginning of the new year, the U.S. Department of Justice’s issuance of a subpoena to Federal Reserve Chair Jerome Powell has sparked heated discussion; meanwhile, his “successor” Kevin Woorch has already received a “prosecution warning” from President Trump before officially taking office.

Last weekend, just one day after announcing Kevin Woorch, a former Federal Reserve Board member, as the next Federal Reserve Chair, Trump joked that if Woorch does not cut interest rates, he might file a lawsuit against him. On Thursday, Eastern Time, U.S. Treasury Secretary Janet Yellen also did not rule out the possibility of such an event occurring.

On that day, Yellen stated at a Senate Banking Committee hearing that whether Woorch would ultimately be prosecuted “depends on the president” if he fails to cut interest rates as President Trump wishes.

Senior Democratic Senator Elizabeth Warren questioned Trump’s “joke” and demanded that Yellen promise: “If the Fed Chair nominated by Trump, Kevin Woorch, does not fully cut interest rates as required, the Department of Justice will not prosecute or investigate him.”

Yellen immediately interrupted and responded, “That depends on the president.”

Warren then immediately asked back, “This should be an easy question. If it’s a joke, why not just say so directly?”

Yellen replied, “That was a joke. He (Trump) even joked with you—Senator Warren—making everyone laugh, with continuous laughter.”

Jokes aside, these successive statements will undoubtedly intensify concerns about the independence of the Federal Reserve. Powell’s term as Fed Chair will end this May. Since Trump took office last year, he has been strongly critical of Powell, repeatedly criticizing him for slow rate cuts and even threatening to dismiss him.

In early January, the Trump administration increased pressure on current Fed Chair Powell and issued a subpoena regarding the renovation of the Federal Reserve headquarters building. Powell strongly opposed this investigation, condemning it as “political pressure” aimed at punishing him for not cutting rates faster.

Currently, outside speculation about whether Woorch will be a “obedient” Fed Chair or a “rebellious leader” varies. Fed Governor Lisa Cook and Atlanta Fed President Raphael Bostic have publicly stated they do not support further rate cuts.

However, Trump himself is quite confident. On Wednesday, he explicitly stated that if his nominated Fed Chair candidate has expressed a desire to raise interest rates, that person will not get the job. He has no doubt that rates “will be lowered very soon.”

Goldman Sachs believes that the market may once again misjudge the actual stance of this new Fed Chair, Woorch leading the Fed may not necessarily lead to higher interest rates, and rate cuts and quantitative easing are still under consideration. The firm expects the Fed to cut rates twice this year, in June and September.

(Source: Caixin)