White House pressure on the Fed risks stoking inflation and hurting markets, study finds
Political interference in Federal Reserve policy tends to push inflation higher and weaken risk assets, according to a study cited by T.S. Lombard economists.
The research, by economist Thomas Drechsel, tracks presidential interactions with the Fed using diary records and highlights episodes where the central bank clearly yielded to political demands—such as under Nixon before the 1972 election and during Lyndon Johnson’s presidency. From this, Drechsel built a "political pressure" index.
T.S. Lombard says the study’s findings are especially relevant today
When the Fed eases policy under political pressure, inflation tends to rise persistently without a corresponding boost in real GDP—in fact, economic output often declinesThe study also shows that inflation expectations climb more sharply when the pressure is publicly visible and widely discussed in the media.The economists warn that any move to fire Fed Chair Jerome Powell or replace him with a loyalist could damage confidence in the Fed’s independence.
“You’d have to take a very short-sighted view to think this is good for risk assets”adds that such a scenario could also hurt the U.S. dollar, especially in the eyes of global investorsthe likely winner would be the euro, backed by one of the most independent central banks in the world—the ECBVisit investingLive.com (formerly ForexLive.com) for additional, original views.
This article was written by Eamonn Sheridan at investinglive.com.Hence then, the article about trump firing powell risks higher inflation lower usd eyes on euro flight to credibility was published today ( ) and is available on forex live ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( Trump firing Powell risks higher inflation, lower USD. Eyes on euro flight to credibility. )
Also on site :
- Man accused of placing pipe bombs near GOP and Democratic headquarters in Washington to remain in jail pending trial
- Aura AI Assistant for Unreal Engine Launches: VR Studio Ships Game in Half the Time with New Agent Capabilities
- Hawaiian Island May Soon Lose One of Its Beloved Visitor Stops