economy
January 15, 2026
Is Trump trying to break the Federal Reserve?
The feud between the Fed chair and the US president seems shocking, but the foundation for central bank independence has long since eroded
TL;DR
- Federal Reserve Chair Jerome Powell's defense against Trump administration pressure to cut interest rates was seen as shocking, but the foundation of central bank independence has already eroded.
- The nation's high debt levels and financialized economy have effectively boxed in the central bank, limiting its autonomy.
- When interest rates rise, the government's interest expenses increase, forcing difficult fiscal choices or more debt issuance, thereby blurring the lines between monetary and fiscal policy.
- Structural changes, including financialization and the 'Fed put' – the expectation that the Fed will stabilize markets – have constrained the Fed's ability to raise rates without causing severe market repercussions.
- The classical notion of central bank independence is now considered an anachronism due to these evolving economic realities and constraints.
Continue reading
the original article