Core Viewpoint - UBS indicates that Federal Reserve Chairman Powell's speech at Jackson Hole displayed a "classic Powell style," signaling an increased probability of a rate cut in September to counteract the drag from trade tariffs, but lacking a mid-term policy framework for an economy facing structural changes [1] Group 1 - The market welcomed the hints of a rate cut, but UBS believes the core message is essentially "data-dependent rhetoric wrapped in fancy language" [1] - UBS pointed out that Powell did not provide a stronger defense of the Federal Reserve's independence, which may lead to potential political influences from Trump on the Fed [1] Group 2 - Potential consequences of a politicized Federal Reserve include: 1) Reignition of inflation uncertainty 2) An increase in actual borrowing costs by an entire percentage point 3) Ripple effects on fiscal policy, corporate investment, housing affordability, household savings, and speculative activities [1]

Group 1 - The politicalization of the Federal Reserve has intensified in recent months, leading to a higher risk premium in the U.S. [1] - Rising budget deficits and debt, along with unpredictable government actions, are causing investors to reassess their exposure to the U.S. dollar [1] - Although recent developments had a slight positive impact on the front-end yields of government bonds, this may not last if the Federal Reserve compromises under pressure from the Trump administration to lower interest rates amid persistent inflation [1]

Core Viewpoint - The outlook for the US dollar is contingent on the underlying factors driving interest rate cut expectations from the Federal Reserve [1] Group 1 - Analysts from Deutsche Bank suggest that if the bets on rate cuts are driven by limited inflation impacts from US tariffs, the dollar may rebound in the short term [1] - Conversely, if these expectations stem from the assumption that the Federal Reserve will yield to political pressure to cut rates, the dollar could face further declines [1] - The market widely anticipates that the Federal Reserve will keep interest rates unchanged in July [1] Group 2 - Any dissenting votes from policymakers against maintaining the current rate, in favor of cuts, could heighten concerns about the Federal Reserve becoming more politicized [1]

Core Viewpoint - Trump's recent comments reflect his long-standing belief that the Federal Reserve should respond more actively to presidential demands, indicating a perception of the Fed as politicized rather than independent [1] Group 1: Political Manipulation - Trump and his advisors claim that the Federal Reserve has become politicized and is not detached from Washington politics [1] - Trump accuses Powell of supporting Biden during his term but not providing similar support for his own agenda [1] Group 2: Economic Analysis - Analysts suggest that Trump's attacks on the Federal Reserve are an attempt to find a scapegoat for the impending economic downturn [1] - Phil Gramm, a Texas Republican senator, notes that people often look for someone to rescue them or to blame [1] - Neil Dutta, head of economic research at Renaissance Macro Research, argues that Trump's view lacks logical consistency, as he believed last year that the economy did not need rate cuts, but now calls for larger cuts [1]