Powell Stays as Caretaker: Who Really Controls the Fed Now?

The Federal Reserve is entering a leadership transition period with Jerome Powell set to serve as interim chair. The move signals that the White House and the Fed are navigating a delicate handover, one that could shape monetary policy for years to come. Markets are watching every word, every appointment hint, and every press conference with unusual intensity.

The significance here goes beyond personnel. The Fed chair sets the tone for interest rate decisions that ripple through every mortgage, every business loan, and every emerging market currency — including the Turkish lira. A caretaker Powell means continuity on the surface, but underneath, the real battle is over who comes next and what that person believes about inflation, employment, and the dollar.

For now, Powell holds the seat but arguably not full political backing. That gap between formal authority and political support is exactly where markets find uncertainty. Historically, Fed leadership transitions have triggered volatility in bond yields and currency markets. Turkey, with its heavy reliance on dollar-denominated financing and a central bank still rebuilding credibility, sits directly in the crossfire of whatever turbulence this transition generates.

Levent KAYIRA Commentary: Ekonomik Gündem Analysis: From my years managing fixed-income portfolios at Turkish banks, I can tell you that Fed leadership uncertainty is not an abstract concern — it moves spreads, shifts capital flows, and reprices risk in markets like Turkey almost immediately. When Bernanke transitioned to Yellen in 2014, Turkish assets sold off sharply. We are not in an identical situation, but the mechanism is the same.

Powell as caretaker means the fed funds rate stays anchored at current levels for now — that's the 5.25-5.50% range that has kept dollar liquidity tight globally. Turkish corporates carrying dollar debt need to watch this closely. Every month of elevated U.S. rates is another month of refinancing pressure.

The TCMB has worked hard since 2023 to rebuild its own credibility. But a politicized Fed transition in Washington could undo some of that goodwill by triggering a broad emerging-market selloff. Watch the USD/TRY reaction over the next two to three weeks — it will tell you whether global investors view this transition as orderly or chaotic.

Bottom line: Powell being temporary is not reassuring. Markets price certainty. Right now, there is none.

Kaynak: Google News Ekonomi