What a Trump ouster of US Fed chief could mean for Singapore markets

US rate cut may boost sentiment in the Republic's equities market but hurt exports

- Kang Wan Chern

US President Donald Trump has reignited worries over the independence of the US Federal Reserve after he said on July 16 that he had floated the idea of firing its chief with Republican lawmakers.

Mr Trump, who later denied media reports that he was planning such a move, has repeatedly criticised Mr Jerome Powell for being "too late" in cutting interest rates.

The US leader has also called for the Fed chairman's resignation multiple times since becoming president.

His comments have heightened fears of political interference in US monetary policy, raising concerns that if Mr Powell is removed, his successor may face greater political pressure to cut interest rates despite legal protections shielding Fed governors from dismissal by the White House over interest rate decisions.

Still, the law does allow for removal "for cause", and White House officials have recently accused the Fed of mismanaging public funds for the US$2.5 billion (S$3.2 billion) renovation of its Washington headquarters.

WHY DOES THE PRESIDENT WANT LOWER INTEREST RATES, AND WHY DOESN'T THE FED?

The US President wants lower rates because net interest payments on US government debt are currently consuming a significant and growing portion of total government spending, said Mr Vasu Menon, managing director of investment strategy at OCBC Bank.

The US government's fiscal year-to-date deficit is reported to be at US$1.36 trillion, which is 14 per cent higher than the same period in 2024.

"There are concerns that this trend could continue and impact the ability of the US to fund other essential programmes and maintain its military supremacy. This is a key reason why Trump is pushing for lower rates," he said.

Lower rates will also help to offset the negative effects of higher tariffs on the US economy.