President Donald Trump's threats to fire Federal Reserve Chair Jerome Powell have had a significant impact on financial markets, Goldman Sachs Chief Economist Jan Hatzius said.
"We have seen significant tightening in financial conditions, with increases in bond yields and declines in equity prices, and also weakness in the dollar," Hatzius said Tuesday on Bloomberg TV. "But net-net, it has tightened our financial conditions index whenever that has come up, and so I think that gives you sort of a foretaste of what would happen if we really did go down this road."
US stocks fell Monday and yields on longer-term Treasury securities rose after Trump
The president's attacks have kept investors on edge in recent days amid reports that the White House is
Hatzius said although Trump can shape the central bank's Board of Governors through appointments, the delegation of rate-setting authority to a broader committee, which includes members not appointed by the president, offers some insulation against political pressure.
"It is an institution that has quite a lot of institutional stability, even in an environment where the president gets to appoint a new chair and new governors," Hatzius said. "So I think there are some significant safeguards built into the system."
