Former Treasury Secretary Lawrence Summers expressed concern over the growing risks to the independence of the Federal Reserve (Fed) amidst recent actions by President Donald Trump.
Warning of Credibility Crisis for Fed
Summers warned that calm conditions in financial markets could change at any moment. 'We're on the foothills of a credibility crisis,' he noted during an interview on Bloomberg Television.
Politicization of the Federal Reserve
Summers highlighted recent initiatives from Trump, including calls for interest rate cuts and harsh criticism of Chairman Jerome Powell. He also mentioned the effort to remove Governor Lisa Cook without due process.
Impact of Budget Deficit on Inflation Expectations
Summers expressed worry that 'highly irresponsible behaviors are being normalized by what the president is doing,' and that large budget deficits may exacerbate the situation. He also noted that Trump's actions could lead to changes in inflation expectations, which may reflect on financial markets.
Lawrence Summers' conclusions underscore the importance of protecting the Fed's independence from political pressure and the need for a professional response from the financial community to ongoing changes.
