Former Treasury Secretary Lawrence Summers has warned that the Fed is “on the foothills of a credibility crisis” in light of President Trump’s attacks on the central bank and Chair Jerome Powell. Trump has pressured the Fed to cut interest rates by 300 bps and has also attempted to fire Fed Governor Lisa Cook “with no kind of due process,” putting its independence under pressure.
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“This is an attack on the governance of the institution,” warned Summers in an interview with Bloomberg Television, adding that “highly irresponsible behaviors are being normalized by what the president is doing.”
Summers Says Republican Silence is Troubling
Summers called out the Republican Party for remaining silent in the face of “the wholesale politicization of the Fed” and warned that inflation remains a risk.
The Fed is widely expected to cut interest rates by 25 bps at the Federal Open Market Committee (FOMC) meeting later this month, which could be concerning if inflation starts to ramp up. A higher interest rate helps combat inflation by making borrowing more expensive, which slows consumer spending and business investment, lowering prices in the process.
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