Fed vs. inflation

Bessent's call to Trump: Don't fire Powell

Scott Bessent has tried to persuade Donald Trump not to fire Federal Reserve Chairman Jerome Powell prematurely. This is reported by sources with insight to the WSJ.

The Treasury Secretary warned that a dismissal could have negative economic, political and legal consequences and could also lead to a new stock market crash.

Bessent is also said to have argued that the Fed appears to be on track to lower interest rates this year, which makes an early dismissal unnecessary, the newspaper writes.

Bank CEO: Trump's demands on the Fed could have the opposite effect

Donald Trump has on several occasions launched a harsh attack on Fed Chairman Jerome Powell to lower the key interest rate. But the moves risk having the opposite effect, that is, leading to higher instead of lower interest rates, warns JP Morgan's chief economist Michael Feroli to CNBC.

“Reduced Fed independence would likely increase upside risks to the inflation outlook, which is already under pressure from tariffs and slightly higher inflation expectations,” he says.

Feroli points to a chain reaction in which higher inflation expectations lead bond investors to demand a higher premium, which in turn pushes up interest rates.

He also draws parallels to the political interference in monetary policy in the late 1960s and early 1970s, which had negative consequences for inflation.