The criticisms of the president of the United States, Donald Trump, at the Fed are at risk of undermining their independence, which could boost inflation and increase the indebtedness costs for the Government, the executive director of Citadel, Kenneth Griffin, and the professor of the Chicago Booth Business School, Anil Kashyap, wrote in an opinion article of the opinion of the opinion of the Wall Street Journal.
The United States faces two key challenges: an unsustainable fiscal trajectory and persistently high inflation, despite benefiting from solid economic foundations, they said.
A possible loss of confidence of investors in the Fed’s ability to deal with inflation without political interference could have strong costs for the government, since the risk premium required by investors would increase to maintain their debt, they added.
Trump has shown his discontent towards the president of the Fed, Jerome Powell, to arrive “too late” to act on the costs of indebtedness and for harming housing buyers with higher mortgage rates.
He has appointed Kevin Hasett, the former governor of Fed Kevin Warsh and the current governor of Fed Christopher Waller in the short list of candidates to replace Powell.
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However, the director of the National Economic Council of the White House, Kevin Hasett, has expressed the importance of maintaining the independence of the Fed of political influence.
The authors argue that the intervention of President Trump and the recent dismissal of the head of the Office of Labor Statistics have undermined the credibility of official economic data, a confidence that takes years to build.
They also referred to the fact that independence should not be a right of Fed; It is something that the Central Bank must win and maintain through transparency, accountability and performance.
However, the independence of the Central Bank helps the Central Bank to make difficult decisions that are necessary to stop inflation, which has been the objective of Congress since the increase in prices harmed the Biden administration in 2024.
Credibility in economic policy is gradually constructed through adhesion to processes and respect, but it can be lost quickly if it is ignored: preserving it reduces the costs of indebtedness, supports growth and maintains global confidence, which makes it a critical priority, the authors concluded.
With Reuters information.
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