A potential alignment between the Federal Reserve, the U.S. Treasury and the Trump administration could set the stage for a sharp rise in inflation and a weaker dollar, according to Bloomberg’s Global Head of Macro Analysis Mark Cudmore.
Cudmore argues that if the Fed and Treasury begin coordinating more closely under a Trump-led government, the result would likely be a pro-inflationary environment. That, he added, would push long-term yields higher and initially boost equities, though the longer-term impact on stocks could be negative.
“Unless you believe that there’s going to be some aggressive intervention in the bond market from the Fed in some other way,” he said, “we’re going to get a whole inflationary spike. Ultimately, that becomes initially positive for stocks, but it becomes problematic over the long term. But other assets that are pro-inflation probably do well.”
Dollar Faces Pressure
The dollar, meanwhile, would likely suffer. Cudmore described the outlook as “absolutely bearish” for the greenback, citing efforts by the Trump administration to pressure yields lower and undermine institutional credibility. These moves, he said, would support inflation and erode confidence in the dollar’s value.
Investors are already reacting. Crypto assets have surged in recent weeks, a trend Cudmore attributes to their appeal as inflation hedges. The analyst also pointed to real assets, such as commodities and property, as likely beneficiaries in a high-inflation scenario.
The comments come amid growing speculation about how a second Trump term could reshape U.S. monetary policy. Trump has previously criticized the Fed for raising interest rates and has floated the idea of more direct control over central bank decisions. A closer partnership between the Fed and Treasury could mark a significant departure from the traditional independence of monetary policy.
