Subject: Trump's pro-inflation aggression
https://www.wsj.com/economy/ce...
Get Ready for the End of Fed Independence
Markets haven’t yet grappled with the implications of the president having control over the central bank

By Greg Ip, The Wall Street Journal, 8/27/2025

The market response to President Trump’s Monday attempt to fire a Federal Reserve governor was relatively subdued.

Don’t let that fool you. If Trump’s effort to remove Lisa Cook for cause succeeds, and perhaps even if it doesn’t, this week will go down as one of the most consequential for financial markets in decades.

It could mark the end of the Federal Reserve’s independence from White House control, which it effectively obtained in 1951. As a result, inflation is likely to be higher and more volatile than in the decades before 2020….

Investors would be wiser to assume that starting sometime in the next nine months, the Fed will set rates according to Trump’s preferences….

Trump-appointed governors wouldn’t necessarily control the Fed’s decisions immediately, because five of the 12 members of the rate-setting Federal Open Market Committee are presidents of the reserve banks. But the board has authority over those presidents, and could force any or all of them out of office by early next year…. [end quote]

This would add to the inflationary Macro trends already in place.

New tax bill with very high deficits = fiscal stimulus.
Tariffs directly increasing consumer prices.
Removing immigrant labor leading to higher labor costs.
Trump forcing Federal Reserve to cut interest rates, both short-term (fed funds rate) and by re-starting QE to suppress interest rates on long bonds.

Of course, Trump could also pressure the BLS to report inaccurately low inflation rates for political reasons by firing any bureaucrat who dares to report the truth. (Just as he did with the employment figures.) But reporting wrong numbers doesn’t change the fact that inflation will increase.

The Wall Street Journal has warned of the impact of Trump controlling the Fed in an editorial.

https://www.wsj.com/opinion/do...
What if Trump Runs the Federal Reserve?
His firing of Lisa Cook shows he wants to put monetary policy under his personal control. He may succeed, but the country will live to regret it.

By The Editorial Board, The Wall Street Journal

…

We know from history what happens to central banks that become arms of politicians. See inflation in Turkey under President Recep Tayyip Erdogan and in Argentina for decades. Richard Nixon jawboned then Chair Arthur Burns to keep monetary policy easy, and the result was the 1970s great inflation…. [end quote]

The stock and bond markets have not reacted to Trump’s firing of Fed Governor Lisa Cook, which she intends to fight in court. If he replaces Cook, he will have appointed four of the Fed’s seven governors.

The power of the Federal Reserve Board goes beyond voting on rates. Members also approve and reappoint the Fed’s regional presidents, who are responsible for financial regulation in their region, including funding for bailouts. In February, all 12 presidents’ terms will expire, and they will need to be reappointed by the board. A board loyal to Trump could fire all the regional presidents and replace them with Trump loyalists.

This is not just an economic trend change but a sea change in the way the economy will be managed. Not since the 1970s has a president meddled so directly with monetary policy.

Wendy