MNI INTERVIEW: Independent Fed Key To Inflation Fight - Raskin

An independent Federal Reserve is the last line of defense against tariff-fueled inflation and any attempts to intervene in monetary policy or push Fed Chair Jerome Powell out of his job would likely backfire and rekindle price pressures, former Fed Governor Sarah Bloom Raskin told MNI Thursday. 

“The Fed right now is the last bulwark for responding to the inflationary impact of the Trump Tariffs and the corporate tax cuts,” said Raskin, also former deputy secretary of the Treasury Department, in response to questions via email. “It is precisely for this reason — a steely and clear eyed focus on inflation now and around the corner — that the Fed was structured to be independent.”

U.S. President Donald Trump lashed out at Powell on social media and from the Oval Office Thursday, accusing him of waiting too long to cut interest rates and causing the U.S. to be at economic disadvantage relative to Europe, and saying Powell's “termination cannot come fast enough.”

“Chairman Powell is being accused of being too late.  But he is actually looking ahead as he is supposed to be doing at the inflationary impact of this administration's actions,” said Raskin. (See: MNI INTERVIEW: Fed Needs More Hawkish Message - Emmons)

LEGAL AVENUES

Raskin, a legal scholar who now teaches at the Duke University School of Law, said she does not believe the president will have any legal avenues to fire the Fed chair -- even if a pending Supreme Court ruling permits Trump's firing of directors at other independent agencies, namely the National Labor Relations Board and Merit Systems Protection Board. Raskin suggested there might be a carve out for the Fed so that it maintains independence. 

“This case goes to the independence of multi-member independent agencies. The Fed is not really such a thing. The Justices are going to be grappling with how to keep the Fed independent and distinguishable from these other agencies (which they seem to want to do), but these proclamations today [from Trump] seem to signal that the Justices can throw the Fed in with the rest — the NLRB, the FTC, etc.,” said Raskin.  

Powell was originally appointed chair by Trump himself, and then reappointed to a second term by former President Joe Biden, which expires May 2026. Powell also holds a term as governor that expires at the January, 2028. 

Recent market instability would be exacerbated if the Fed chair were suddenly fired, said Raskin. “Markets are not going to react well — volatility will soar.  And as you also are probably aware, countries that do not have independent central banks have higher levels of inflation.” (See: MNI INTERVIEW: U.S. Safe-Haven Status Under Pressure - Liang)