The ousting of Sessions suggests that Trump's fight with the Fed is about to get worse

President Trump's constant attempts to prevent the Department of Justice from doing what he does not want have also taught us an economic lesson: the Federal Reserve is next.

The simplest story is that the Fed is raising rates more than would like Trump, and it seems like it's only a matter of time before his war of words that keeps growing does not turns into action. Trump, after all, has already gone on to say that he was "not thrilled" with what the Fed is doing to "very unhappy", instead of considering it as the "biggest risk" for the # 39; s economy. It is therefore not necessary to read between the lines when Trump says, as far as he is concerned, that the Fed is independent only "in theory".

Of course, this will only worsen in the run-up to the 2020 elections. There are two reasons for that. The first is that the Fed has given all indications as to the continued rise in interest rates at the same slow and steady pace that it has set for two years. Although he did not raise them during his meeting on Thursday, he wanted to remind that further rate increases are coming. Why would not they? Trump introduced a $ 1.5 trillion tax reduction into the economy, while unemployment was already 4.1%. This has forced the Fed to raise interest rates more than it was going to, so rates should soon reach about 3% or more.

It might not seem like a lot, and it's not by historical standards, but by our current standards. Interest rates are still zero in the euro zone and Japan. This means that investors can do much better to put their money in US Treasury bonds than, for example, in German bonds – and when they do, the dollar rises. A little, actually. Consider this: Since the beginning of the year, the trade-weighted dollar has risen by 7.6% against a broad basket of currencies and has reached its highest level in 20 years.

This is the second reason why the fight between Trump and the Fed will get worse. A strong dollar hurts two of the things he talks about most in the economy: the trade deficit and the factory jobs.

It's quite simple: the more the dollar appreciates relative to other currencies, the more our exports cost in other countries. They will therefore buy less of what we manufacture – especially manufactured goods – and we will buy more of their cheaper products. It's not necessarily an economic problem, but it can be political. That was at least the case for Democrats in 2016. It was the last time the dollar reached this level and the result was a localized blue-collar recession that might have helped to tip the states pivots from Rust Belt to Trump.

Trump will continue to feel threatened by the Fed. As we have seen, he does not let things like the standards hinder when he feels threatened – especially before the elections. He will transfer or expel whoever he wants, even if they are supposed to be independent. That was the case of the FBI Director and the Attorney General, and this could become the case of Fed Chairman Jerome H. Powell. That said, there is a difference here: the Justice Department's officials are not informally independent, while the Fed's presidency is a matter of law. The head of the Fed can only be fired for "just cause", which is generally not considered to include policy disagreements. This is the kind of thing the courts should apply.

Would they do it? Good question.

In the meantime, you may want to pay special attention to all those on television who say the Fed is raising rates too quickly. There is a good chance that Trump is.