University of Michigan economist and former Obama White House advisor Betsey Stevenson issued a stark warning about the consequences of ending the Federal Reserve's independence.
What Happened: On Monday, in a post on X, Stevenson suggested that mortgage rates could rise significantly if the markets lose faith in the central bank’s ability to manage inflation.
“End the independence of the Fed and get higher mortgage rates,” she said, while adding that “how high?” depends on whoever is better at predicting higher inflation rates, and this can be banks, investors, or borrowers.
See Also: Trump’s Fed Pick? He’s Cutting First, And Cutting Powell Out
Stevenson said this while quoting a post by Bloomberg columnist Matthew Yglesias, who expressed similar concerns that ousting Fed Chair Jerome Powell, in favor of “a lackey,” would not bring down mortgage rates. “The whole thing seems based on false premises to me,” he says.
Why It Matters: This comes amid escalating tensions between President Donald Trump and Powell, with speculations rife that the latter could be ousted from his position.
Trump has repeatedly stated his demands for a 1% interest rate, accusing Powell of keeping rates “artificially high,” while the Powell-led Fed says that it was Trump’s tariffs that deterred it from easing monetary policies.
Economist Peter Schiff has warned in the past that Trump’s pick for a new Federal Reserve Chair would be “a loyal soldier,” someone who is “willing to sacrifice the dollar and create as much inflation as needed to monetize exploding debt to keep interest rates artificially low.”
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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