Potential Dollar Depreciation Poses Challenges for Trump and the Federal Reserve

The depreciation of the U.S. dollar could present significant challenges for U.S. President Donald Trump and the Federal Reserve. According to Jin10, a substantial decline in the dollar's value may lead to the risk of 'importing' inflation into the United States. Joe Kalish, Chief Macro Strategist at Ned Davis Research, noted that Trump's disregard for the dollar might backfire, undermining his economic plans and potentially causing the Republican Party to lose its majority in the House of Representatives. On Wednesday, Federal Reserve Chairman Jerome Powell stated that the Fed would not discuss dollar issues, as the Treasury Department is responsible for currency regulation. Ironically, if inflation becomes more severe, it might be the Federal Reserve's actions that help defend the dollar. Continued depreciation of the dollar, leading to further inflation, could prevent the Fed from lowering interest rates as Trump desires and might even compel it to raise rates.