In one of the main Presidential debates last year Donald Trump accused Federal Reserve Chair Janet Yellen of playing politics in keeping interest rates too low for too long. He said by that by doing this the Fed would cause problems for the economy when it does come to raise them because they would be behind the curve, having waited too long.

Now that we’ve moved past the second US rate rise in the last 12 months and US markets remain within touching distance of their recent new record highs this relationship is likely to be one of the most closely watched of the Trump Presidency.

For most of last week the focus has been on the various executive orders the new President has implemented and the concerns that these could well feed into higher inflation and in turn higher interest rates.

This week the focus turns towards the US Federal Reserve as they meet for their first meeting of 2017, and what changes are likely to occur over the next 12 months, given recent hawkish guidance from a number of senior policymakers.

Will President Trump, now that he has his hands on the levers of power alter his rhetoric, and will the Fed follow through on the hawkish tone that we’ve seen so far this year, from a number of Fed members?

Given the furore unfolding around recent events and the almost frenetic speed of each new executive order, it wouldn’t be a surprise if a number of FOMC members were starting to look on with some alarm as to the longer term effects that some of this, and possibly future measures, might have on the US economy, as well as the global economy more broadly.

With that in mind it seems unlikely that we’ll see a statement that much different to the one we saw in December, with a cautious approach to the economy likely to be reinforced, given we still have no serious detail on the composition, magnitude or timing of any potential fiscal stimulus program.

We already know that Janet Yellen’s term as Fed chair runs out this time next year and it wouldn’t be a surprise to not see that term renewed, which begs the question as to who will replace her, and whether the new President will use this as an opportunity to “reform” the Fed.

While last year’s criticism of the Fed may have been canny politics, as he can then blame them for any bumps in the road over the course of the next few months, it also opens up the prospect that the new administration may seek to alter the Feds mandate in such a way as to erode its independence.

Mr Trump has been quoted in the past as saying that he wants to abolish the central bank, and while there doesn’t appear to be any prospect of that now, the new President is still likely to want to influence how the bank sets policy, and look to reform it.

While no-one expects a change in rates this week markets will be looking for clues as to how Donald Trump responds to this weeks Fed meeting and their statement on the economy.

He already has the option to make his own appointments to the two vacant seats on the Fed board and these choices could well dictate the type of approach he intends to take towards an institution he has been highly critical of in the past.

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