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Federal Reserve Chair Jerome Powell keeps trying to fight off his big bully — Trump

Brian Sozzi
Editor-at-Large

Federal Reserve Chairman Jerome Powell is doing all he can to stomp on yawning market worries that monetary policy is being driven by President Donald Trump’s Twitter feed.

Obviously, a highly active presidential Twitter account dictating interest rates wouldn’t be good for the markets at any point in time.

“I give Powell a lot of credit — a lot of people would have said he is beholden [to Trump],” veteran strategist Matt Maley at Miller Tabak said on Yahoo Finance’s The First Trade. “I think Powell has a lot more backbone than a lot of people give him credit for.

Others around Wall Street seem to agree with Maley.

“He has been very consistent about the Fed’s independence as has been everyone on the Fed board of governors,” Pimco head of public policy Libby Cantrill told Yahoo Finance.

“This president has a very unconventional approach with the Fed needless to say. But from the market’s perspective, Powell reasserting the Fed’s independence is helpful absolutely,” Cantrill added.

Aside from coming right out in prepared remarks to the U.S. House of Representatives on Wednesday and reiterating the Fed’s independence, Powell once again stated he has no intentions of being shoved out by the lower interest rate seeking Trump if asked.

“Of course, I would not do that,” Powell told Representative Maxine Waters (D-CA) Wednesday when pressed if he would depart if asked by Trump. “What I have said is the law gives me a four-year term and I fully intend to serve it.”

It’s an answer that Powell has come to use in recent months when probed about his relationship with Trump.

Stock market rally

As far as the stock market is concerned, it’s probably hoping the Trump versus Powell battle ensues for the foreseeable future.

The S&P 500 (^GSPC) rally continued this week, with the index breaking through the 3,000 mark as Powell struck another dovish tone to lawmakers ahead of the FOMC’s next meeting on July 30-31. Meanwhile, the Dow Jones Industrial Average eclipsed 27,000 Thursday as Powell retained his dovish stance in testimony to the Senate.

Risky areas of the market — notably richly valued tech stocks such as Amazon (AMZN) and Apple (AAPL) — continue to melt-up amid the prospect for even cheaper money from the Fed.

“Powell is doing what he thinks is right for the economy and what the Federal Reserve board thinks is right for the economy. I think he will continue to do that,” Maley said.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow him on Twitter @BrianSozzi

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