Economist Justin Wolfers is warning that President Donald Trump's fixation on low interest rates could set the U.S. on a nightmarish path, one that increasingly mirrors the unrelenting inflation crisis that has gripped Turkey over the past couple of years.
What Happened: On Tuesday, the University of Michigan economist shared a brief clip from his recent CNN appearance on X, voicing his concerns regarding political leaders who push for persistently low interest rates without any consideration for inflationary dynamics or institutional guardrails.
“There’s a horror film that still gives me nightmares,” Wolfers says, referring to Turkish President Recep Tayyip Erdoğan, whose insistence on low interest rates led to an inflationary spiral, which rose to 86%, before settling down at 38% today.
Wolfers sees stark parallels between what happened in Turkey and where the U.S. is headed right now. “A populist strongman comes to power with a weak grasp of economics but a love of low interest rates and few political checks,” he says, referring to Trump’s recent remarks regarding the Federal Reserve and interest rates.
“If the President remains wedded to this low interest rate idea,” while inflation starts to rise, “that then can cause an inflationary spiral,” he says.
Wolfers says that “if Trump were to insist on these sorts of policies, that’s exactly the script that we’d follow,” before asking if we “should fear an American sequel” to Turkey’s economic nightmare.
Why It Matters: On Monday, U.S. Treasury Secretary Scott Bessent said that he would do “what the President wants” when asked about his likelihood of heading the Central Bank after Jerome Powell’s term ends in May 2026.
This is not unlike Erdogan appointing his former finance minister, Naci Agbal, to the position of Central Bank Governor in late 2020.
There have been growing concerns regarding the Fed’s independence in recent months, as tensions continue to flare between Trump and Powell.
This week, Trump once again referred to Powell as a “stupid person” and “a bad person” for not cutting interest rates, which he says should be at “1% or 2%.”
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