Former Federal Reserve Chairs Ben Bernanke and Janet Yellen have cautioned that President Donald Trump‘s ongoing pressure on the current Fed chief, Jerome Powell, could have dire long-term consequences for the U.S. economy.
What Happened: Bernanke and Yellen, in an op-ed published by The New York Times on Monday, emphasized the importance of maintaining the central bank’s independence. They urged Trump to select a successor for Powell who would continue to uphold this independence.
The ex-Fed chairs stated, “President Trump, like all Americans, is entitled to express his views on monetary policy. He will have a chance to put his stamp on the Federal Reserve by nominating someone to succeed Mr. Powell when his term ends next spring.”
They further advised Trump to nominate a candidate who would “keep an appropriate distance between the Fed and short-term politics,” and is committed to preserving the Fed’s independence in monetary policy decision making.
Citing past instances, Bernanke and Yellen cautioned that if the Fed’s decisions are swayed by political pressure rather than data, it could result in “inevitably higher inflation and economic damage.” They noted that such actions could erode public confidence, leading to higher borrowing costs for everyone, including home buyers, businesses, and the government.
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Why It Matters: Federal Reserve Chair Jerome Powell's second term ends in May, and Trump has expressed interest in replacing him. Despite the legal and market-related risks of doing so, Trump is expected to nominate someone more aligned with his policy goals.
This op-ed comes amid a series of criticisms and warnings from financial experts and former government officials about Trump’s economic policies.
Janet Yellen, who served as the Fed Chair under former President Barack Obama, has been a vocal critic of Trump’s economic policies. In a recent interview with CNN, she described Trump’s policies as the “worst self-inflicted wound” on a well-functioning economy.
Meanwhile, economist Peter Schiff has accused Trump of hypocrisy regarding the Federal Reserve’s interest rate policy, stating that Trump’s demands mirror what he had previously condemned.
Another former Trump advisor, economist Judy Shelton, has also criticized the Federal Reserve, calling for a structural overhaul and questioning the notion of central bank independence.
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