Trump’s calls to dismiss Fed governors undermine independence, Citadel CEO writes in WSJ op-ed

U.S. President Donald Trump’s criticism of the Federal Reserve risk undermining its independence, which could boost inflation and increase borrowing costs for the government, Citadel CEO Kenneth Griffin and Chicago Booth Business School professor Anil Kashyap wrote in a Wall Street Journal op-ed piece on Sunday.

The United States faces two key challenges - an unsustainable fiscal path and persistently high inflation - despite benefiting from strong economic fundamentals, they said.

A potential loss of investor confidence in the central bank’s ability to tackle inflation without political interference could have steep costs for the government, as it would increase the risk premium demanded by investors to hold its debt, they added.

Trump has shown his discontent towards Fed Chair Jerome Powell for being “too late” to act on borrowing costs and for hurting home buyers with higher mortgage rates.

He has named Kevin Hassett, former Fed Governor Kevin Warsh and current Fed Governor Christopher Waller in the short list of candidates to replace Powell.

Federal Reserve must be ‘fully’ immune to politics: top Trump aide

However, White House National Economic Council Director Kevin Hassett has been vocal about the importance of maintaining the central bank’s independence from political influence.

The authors argue that President Trump’s intervention and the recent dismissal of the head of the Bureau of Labor Statistics have undermined the credibility of official economic data, a trust that takes years to build.

They also touched upon the fact that independence should not be the Fed’s entitlement; it is something that the central bank should earn and maintain through transparency, accountability and performance.

The independence of the central bank, however, helps the central bank make difficult choices that are needed to curb inflation, which has been the aim of Congress since rising prices hurt the Biden administration in 2024.

Credibility in economic policy is built gradually through adherence to processes and respect but can be quickly lost if ignored - preserving it lowers borrowing costs, supports growth, and maintains global trust, making it a critical priority, the authors concluded.