In-depth Analysis: A Weakening Dollar Could Pose Challenges for Trump and the Federal Reserve

Dollar Weakness Sparks Inflation Fears

Recent declines in the dollar have raised concerns about the risk of "imported" inflation for the US. If the dollar continues to weaken, American consumers could face higher prices on imported goods, potentially driving up overall inflation levels.

Trump's Economic Agenda Faces Obstacles

Joe Kalish, Chief Macro Strategist at Ned Davis Research, noted that Trump's stance on the dollar could negatively impact his policies. He warned that a weaker dollar might undermine economic initiatives and affect the Republican majority in the House of Representatives.

Fed's Role Takes a New Turn

While Powell emphasized that dollar policy falls under the Treasury's jurisdiction, the Fed may need to adopt tighter monetary measures if inflation worsens. This contradicts Trump's desire for lower rates and could even lead to interest rate hikes.