New York
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While many CEOs have stayed silent during President Donald Trump’s attacks on the Federal Reserve, hedge fund billionaire Ken Griffin is speaking out about the dangers.
Trump risks “stoking both higher inflation and higher long-term rates” by undermining the independence of the Fed, Griffin co-wrote in an op-ed in The Wall Street Journal on Sunday titled “Trump’s risky game with the Fed.”
“The president’s strategy of publicly criticizing the Fed, suggesting the dismissal of governors and pressuring the central bank to adopt a more permissive stance towards inflation carries steep costs,” wrote Griffin, CEO of Citadel; and Anil Kashyap, a professor at the Chicago Booth Business School and a consultant to the Chicago Fed’s research department.
The duo warns that history shows how this strategy can backfire, including the Nixon-era pressure on the Fed in the 1970s that set the stage for the Great Stagflation crisis.
“In a worst-case scenario, if the Fed visibly bows to political pressure and permits inflation to rise unchecked, tens of millions of retired Americans will see their savings diminished,” Griffin and Kashyap wrote. “Senior voters — tired of bearing the brunt of inflation — could cost the administration dearly in the midterms.”
The White House did not immediately respond to a request for comment.
The warning represents a rare reprimand from a CEO at a time when many business leaders have tried to steer clear of publicly criticizing the president and others have gone out of their way to curry favor. Big bank CEOs publicly defended Fed independence this summer, while avoiding criticizing Trump directly.
Griffin, who has said he voted for Trump in last November’s election, has repeatedly slammed the administration’s trade war.
Trump has relentlessly condemned Jerome Powell, his handpicked Fed chair who was later reappointed by former President Joe Biden. Some Fed watchers worry Trump could try to give the US central bank a MAGA makeover in an effort to exert greater influence over interest rates.
Last week, Treasury Secretary Scott Bessent argued the Fed must be relieved of its duties regulating America’s banks because the US central bank has veered from its core mission.
Griffin and Kashyap, in the Journal op-ed, expressed concern that Trump’s war on the Fed will backfire in at least two ways.
First, artificially low rates from the Fed could overheat the economy — worsening inflation at a time when polls show voters remain frustrated over the cost of living.
Secondly, investors could lose faith the Fed is committed to keeping prices stable, leading to even higher long-term borrowing costs for both the federal government and homebuyers.
“While the US benefits from a large stock of credibility accumulated over decades, it isn’t limitless,” Griffin and Kashyap wrote. “If eroded, markets will demand far higher interest rates for longer-term debt.”
The two also argued that it’s in the president’s “best interest” for the Fed to be viewed as independent and to actually act independently.
This frees Fed officials to make unpopular but necessary choices — like spiking interest rates to fight inflation. That’s what the Powell-led Fed did (albeit belatedly) in 2022 when prices skyrocketed.
“Credibility in economic policymaking is built slowly, through practice and respect for processes,” Griffin and Kashyap wrote, “and can be lost quickly if those processes are disregarded.”