Pimco warns of US market revolt
Pimco’s chief investment officer has warned that any attempt to limit the US Federal Reserve’s independence would be “very bad for markets”.
“Markets value central bank independence, at least around the setting of policy rates,” said Dan Ivascyn, chief investment officer of the $2.1tn bond-focused fund manager Pimco.
“Although there’s always tension between policymakers, any attempt to reduce independence would be very bad for markets.”
Concerns have been swirling over the Fed’s independence even though the Supreme Court has signalled that the White House cannot fire Fed chair Jay Powell or any of the bank’s other six governors due to disputes over monetary policy, write Harriet Clarfelt, Claire Jones and Lauren Fedor.
Trump has lashed out repeatedly at the Fed and Powell, whom he has called a “numbskull” for declining to reduce rates this year.
Ivascyn’s comments came just hours before Trump sparred with Powell over the costs of the renovation of the Fed’s headquarters in Washington when the president visited the construction site on Thursday.
Still, some of Trump’s actions of late have been lauded. Blackstone’s president Jonathan Gray reckons recent trade deals and tax cuts have restored confidence in US financial assets, writes Antoine Gara.
Deals with Britain, Japan and Indonesia, as well as tax changes favourable to corporations and wealthy individuals, had removed investor uncertainty and fuelled rising excitement about opportunities to invest in artificial intelligence and digital infrastructure spending, Gray said in an interview with the Financial Times.
“There has been a restoration of confidence in terms of US assets and just the continued growth in earnings of US companies,” he added.
Gray expected the renewed enthusiasm for US assets would fuel a broad capital markets recovery later this year, with initial public offerings and corporate takeover activity accelerating significantly through the autumn.