Fed Watch: Trump Signals Leadership Shake-up After Claiming "Inflation Victory"

In a speech characteristic of his economic optimism, President Trump declared in Davos that the US has “defeated inflation,” citing a core inflation rate of 1.5%, and forecasted a staggering 5.4%GDP growth for the fourth quarter—double the IMF's projection.

Key Data Snapshot

• Core Inflation Rate: 1.5%
• Q4 GDP Forecast: 5.4%
• Key Risk Asset: US Dollar (facing reflation fears)

Targeting the Fed

Beyond the data, Trump reignited speculation regarding US monetary policy leadership. He explicitly criticized current Federal Reserve Chair Jerome Powell, stating his performance was “terrible,” and confirmed he would announce a new nominee in the “near future.”

• The implication: Trump hinted that while Fed Chairs must “do what is right,” he expects a change in behavior, signaling a preference for a central banker more aligned with his “high growth, low rate” vision.

Economic Data vs. Rhetoric

Trumps claim that “growth fights inflation” runs contrary to orthodox economic theory, which typically views rapid expansion as inflationary.

• Market Impact: If the White House pushes for aggressive rate cuts to fuel 5% growth while maintaining high tariffs and debt spending, the US Dollar could face volatility stemming from fears of reflation.
• Reaction: US equities initially welcomed the pro-growth rhetoric, predicting the “Trump Put” remains alive, but bond markets remain wary.