Renovation dispute sparks controversy over the Fed chair's position

Fed Chairman Powell is facing unprecedented pressure. A seemingly bizarre renovation controversy is becoming a new opportunity for certain political forces to try to force him to resign. This incident not only affects the nerves of the American political arena but also makes the global financial markets tense and uneasy.

The conflict between Powell and certain politicians has a long history, with the core disagreement revolving around monetary policy orientation. One side advocates for interest rate cuts to stimulate the economy, while the other insists on a prudent stance. This divergence has persisted since 2018.

Interestingly, Powell initially received support from certain politicians when he took office. However, over time, the relationship between the two sides deteriorated sharply. Starting from October 2018, public criticism grew, accusing the Fed of raising interest rates too quickly, endangering the economy.

Recently, the situation has escalated further. Some have called for Congress to investigate Powell, accusing the Fed's headquarters renovation project of significant violations. At the same time, rumors are circulating that Powell is considering resigning, causing the situation to rapidly intensify.

In the face of these pressures, Powell chose to respond directly. He requested the inspector general to continue reviewing the renovation projects and to explain in detail through official channels the reasons for the cost increases, refuting the allegations of "luxurious renovations."

Currently, Powell is in a quandary regarding policy making. On one hand, certain policies may bring inflationary pressures; on the other hand, there are signs of cooling in the labor market. Lowering interest rates too early could lead to runaway inflation expectations, while continuing to raise rates may trigger turmoil in the bond market.

If Powell really resigns, global financial markets may experience severe fluctuations. Some analysts believe that the dollar index could fall sharply in the short term, and the fixed income market will also face significant selling pressure. More worryingly, this could affect the Fed's currency swap agreements with other central banks.

However, even if Powell is replaced, the new chairman may face similar challenges. If inflation rises again, the new chairman may have to reconsider tightening policies.

Regardless, Powell's departure or retention has become an important factor affecting the nerves of global financial markets. This is not only related to the direction of U.S. monetary policy but also involves the core issue of central bank independence. The future development of the situation is worth close attention from all market participants.