The Fed’s independence is hanging by a thread, and this ‘nuclear’ scenario would signal ‘things are truly going off the rails,’ economists say

Douglas Elmendorf, an economist at Harvard and former director of the nonpartisan Congressional Budget Office, said that Trump’s demand for the Fed to cut its key rate by 3 percentage points would overstimulate the economy, lifting consumer demand above what the economy can produce and boosting inflation — similar to what happened during the pandemic. The “overall goal of this design is delivering the economic benefits” of an independent central bank, Miran wrote, “while maintaining a level of accountability that a democratic society must demand.” Trump has nominated Miran to the Fed’s board to replace Adriana Kugler, who stepped down unexpectedly Aug. 1. “The nuclear scenario is … the reappointment of the reserve bank presidents and interfering with that, (which) would be the signal that things are truly going off the rails,” said Adam Posen, president of the Peterson Institute for International Economics.

Author: Christopher Rugaber, The Associated Press

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