"If you touch the Fed, you may face unexpected backlash."
Jamie Dimon, CEO of JPMorgan Chase, who is referred to as the 'king of Wall Street,' publicly opposed U.S. President Donald Trump's attempts to shake the Federal Reserve (Fed) on the 15th (local time).
JPMorgan Chase, led by Dimon, is the largest bank in the world by market capitalization as of last year.
Following the announcement of the second quarter results, Dimon met with reporters and noted, "The independence of the Fed is absolutely important," adding that "interfering with the Fed could produce the opposite result, which is backlash."
Dimon has been a strong supporter of pro-business policies, such as tax cuts and deregulation, during the Trump administration.
Even he has unusually taken a stand against the replacement of the Fed chair, leading to an analysis that Wall Street is strongly braking Trump's attempts to replace the Fed chair.
The Wall Street Journal (WSJ) rated Dimon's comments as "the clearest warning from Wall Street."
There is a long-standing investment adage in the financial sector: "Don't fight the Fed." It serves as a warning that investing against the direction of the policy of the Federal Reserve, the U.S. central bank, can lead to significant losses.
The Federal Reserve has powerful authority to determine interest rates and control the amount of money (currency) circulating in the market. One decision can cause turmoil in financial markets worldwide, such as stocks, bonds, and exchange rates. This is why the Fed chair is called the president of the global economy.
Since the beginning of his second term, the Trump administration has consistently shaken this powerful authority. Trump criticized that "Jerome Powell isn't lowering interest rates fast enough or enough to support economic growth" and pressured for a replacement.
However, Wall Street thought differently. They welcomed the pro-business policies that Trump initiated but firmly opposed any attempts to undermine the independence of the Fed.
The New York Times (NYT), citing experts, evaluated that the independence of the Fed is regarded as a linchpin in the U.S. free market system. If political logic dictates monetary policy, market trust collapses. This can lead to capital flight and financial instability. The U.S. financial sector has experienced this several times.
In the 1970s, President Richard Nixon strongly demanded that then-Fed chair Arthur Burns lower interest rates for his re-election. The Fed, succumbing to pressure, loosened monetary policy, leading to the worst inflation that struck the U.S. in the 1970s.
The Wall Street Journal (WSJ) reported Dimon's comments, saying, "Many Wall Street figures are concerned about the erosion of central bank credibility due to political pressure."
Dimon has always taken on the role of a "spokesperson for Wall Street." Given his influence, it is likely that other influential figures on Wall Street will raise their voices in defense of the independence of the Fed.
There are assessments that this warning may become a signal that garners support for Powell. Previously, Powell himself stated that he "receives considerable confidential support." Central bank leaders from other major countries, including the European Central Bank (ECB), also support Powell.
The repercussions of forcibly replacing him on the U.S. economy cannot be ignored. Financial analysis firm Piper Sandler analyzed that if Trump tries to replace Powell before his term expires (May 2026), U.S. 10-year government bonds could see interest rates surge by 0.25 to 0.5 percentage points.
This could raise interest rates across the economy, including for mortgages and student loans, leading to results contrary to Trump's calculations. It highlights what kind of side effects a policy that loses market trust can have.
Thus, concerns have been raised that if monetary policy is swayed by the political appetite, it may stimulate the economy in the short term, but lead to severe side effects like uncontrollable inflation in the long term.