President Trump’s demands on the Fed to loosen monetary policy impact financial markets, according to new research published by the Bank of Canada.
In the study released this month, Antoine Camous of the University of Mannheim and Dmitry Matveev of Canada’s central bank looked at Fed funds futures, a guide to where investors are betting monetary policy is headed, on the days that President Trump Tweeted about Chairman Powell and the Fed’s decisions.
“By relating price movements of these contracts with President Trump’s tweets on monetary policy, we explore how markets have perceived presidential attempts to influence monetary policy decisions,” the study said. “Overall, our results indicate markets expected the Federal Reserve to adjust monetary policy in the direction suggested by President Trump.”
The study found expectations were revised between 0.3 and 2.3 bpts on the days with relevant Tweets.
The Bank of Canada says research reports it publishes may differ from its official view and that it’s not responsible for the findings of such studies.
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