IT WAS the kind of moment that would have once seemed preposterous. Palpable tension between a sitting US president and Federal Reserve chair over renovation costs (not even interest rates) playing out publicly in full view of the cameras. Awkward, much.
Beyond the viral clip of the uncomfortable exchange between Donald Trump and Jerome Powell, the episode underscores a rift that also carries serious broader risks with the big question: Could the steady hand of the Fed, long a compass for South-east Asia and the world, be starting to waver?
Call it a shift or a matter necessitated by domestic conditions, the rate playbook in Asean lately could provide some clues.
Both Malaysia and Indonesia have moved ahead of the Fed. On Jul 9, Malaysia cut its benchmark rate for the first time since the pandemic over rising growth concerns amid moderate inflation prospects. Just this week, the central bank cut its 2025 GDP forecast for the country owing to rising tariff uncertainties and geopolitical instability.
A week later, Indonesia delivered the year’s third consecutive cut, hoping to stimulate the domestic economy.
It’s a notable shift for a region that once held back, wary of moving before the world’s largest and most influential central bank for fear of spooking the markets or triggering capital outflows.
While these pre-emptive moves, ahead of the Fed, would’ve been less telling in past cycles – maybe even routine – in today’s climate, where the US is increasingly at odds with the rest of the world on trade and tariffs, they tend to stand out.
Meanwhile, the Fed has held rates steady all year, despite earlier market hopes of a pivot. It remains cautious amid sticky US inflation and is waiting for more clarity on how Trump’s new tariffs are affecting the world’s largest economy.
The Fed opened its two-day policy meeting on Tuesday (Jul 29) with the central bank widely expected to hold off on further rate cuts despite fierce political pressure from Trump.
Singapore isn’t ignoring the Fed. In fact, no one is. But the Monetary Authority of Singapore’s easing of its exchange rate policy twice in the first half of 2025, followed by its pause on Wednesday, shows it too is setting its own pace based on global and economic headwinds.
With de-dollarisation talk growing louder, and the Fed’s pause contrasted against certain Asean countries’ early rate cuts, these could hint at a region increasingly willing to chart its own course whether or not Washington keeps pace.
The latest developments also signal regional central banks’ growing confidence in domestic-led monetary policies.
If the Fed does cave to political pressure and cuts sharply, Asean won’t be insulated. Currencies like the ringgit and rupiah could come under renewed pressure, especially if investors start to question whether the Fed is still calling the shots based on data or politics.
The Trump-Powell feud is shaping up to be a stress test for global institutional credibility and Asean can’t afford to tune out, even if the theatrics feel like an American soap opera. The Fed’s independence has long underpinned global market stability. If that foundation starts to crack, there will be adverse ripple effects.