President Donald Trump has vowed to swiftly defeat inflation once back in the White House, but his unprecedented attacks on the Federal Reserve could do the opposite. The president’s plan to fire a Federal Reserve governor is unprecedented and could undermine monetary policy independence.
The Fed’s design as an independent agency from political interference has led economists and former officials to warn that Trump’s actions are playing with fire. History shows that politicizing interest rates can lead to worse economic outcomes, including overheating the economy and fueling inflation. The US already faces high inflation, and any attempt to artificially lower interest rates could exacerbate this problem.
Trump’s proposal would also put investors on edge, as they question the Fed’s commitment to low and stable inflation. This would lead to higher long-term interest rates, including mortgage rates, which are already struggling to stay below 7%. The irony is that Trump’s actions risk undermining his campaign promise to drive down inflation and exacerbate the affordability crisis.
Trump’s assault on the Fed has parallels in history. In 1970, President Nixon pressured his handpicked Fed chief, Arthur Burns, to lower interest rates to boost his election chances. This led to high inflation and economic instability. Similarly, Turkish President Tayyip Erdogan’s interference with his central bank has caused severe economic problems.
Experts warn that Trump’s actions are a “naked attack on the independence of the Fed” and could have long-term consequences for generations to come.
Source: https://edition.cnn.com/2025/08/26/business/trump-fed-lisa-cook