How Trump’s attack on the Fed could be turned into an own goal
Donald Trump’s attempt to bring the Federal Reserve to heel through political pressure and legal action should not surprise anyone. Independent institutions that constrain executive power are anathema to illiberal leaders. Courts, regulators and central banks all represent the same obstacle: the idea that competence and rules can override political will.
That is why former US Fed chairs and central bank governors across the world have reacted so forcefully. This is not only professional solidarity. It is recognition that if Trump succeeds in subjugating the Fed, no independent monetary authority is safe. The line of defence that has kept inflation under control would be fatally weakened.
Central bank independence is not a technocratic nicety. It is the main institutional barrier against inflation. When politicians gain control over monetary policy, prices rise and living standards fall. Even the perception that the Fed might be politicised is enough to push up inflation expectations, borrowing costs and exchange rate volatility. That translates directly into higher mortgage payments, more expensive imports and rising food and energy bills.
This is why Trump’s assault on the Fed can and should be turned into a spectacular own goal. Those who defend liberal democracy need to hammer home the link between his actions and the cost-of-living crisis Americans fear most. Undermining the Fed does not make the US stronger – it makes households poorer. If that message lands, it will cut straight into Trump’s political support and reinforce the public’s doubts about his handling of the economy.
Fabian Zuleeg is Chief Executive and Chief Economist at the European Policy Centre.
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