Trump's push to cut interest rates has echoes of 'banana republic', says Yellen
5 hours ago
- #Central Bank Independence
- #Federal Reserve
- #Interest Rates
- Janet Yellen, former Fed chair, criticizes Donald Trump's push for lower interest rates, comparing it to actions typical of a 'banana republic'.
- Trump has repeatedly urged the Federal Reserve to cut rates to reduce the U.S. government's borrowing costs on its $39 trillion debt.
- Yellen warns that inflation can spiral out of control if central banks become influenced by politicians seeking cheaper borrowing.
- Fed Chair Jerome Powell is set to step down, but may stay if his successor, Trump's pick Kevin Warsh, is not confirmed by the Senate.
- Trump has threatened to fire Powell if he doesn't leave, while Powell claims the case against him is a pretext to pressure rate cuts.
- Yellen questions Warsh's credibility compared to former Fed chair Alan Greenspan, and whether other Fed governors will support his views on AI and rates.
- The Fed last cut rates in December, but policymakers are now concerned about inflation risks due to the war in Iran.
- Central bank independence is emphasized by Bank of England governor Andrew Bailey, citing oil price shocks from the Iran conflict as a major concern.
- The IMF warns of a potential global recession if the Strait of Hormuz remains closed for an extended period.