Former Obama adviser warns Trump's promises could force Fed to raise rates, citing threat to central bank independence

Jason Furmana key figure of the former president From Barack Obama The Trump administration has written an op-ed in The Dispatch warning of potential threats to the Federal Reserve's independence under a possible second term for the Republican presidential nominee. Donald Trump.

What happenedIn his article, Furman remember Trump’s history of criticizing the Federal Reserve. He cites a 2019 incident in which Trump tweeted: “My only question is, who is our greatest enemy?” Jay Powell Or President Xi?” shortly after the Fed cut rates to around 2.1%.

Furman argues that Trump’s campaign promises could create inflationary pressures, forcing the Federal Reserve to raise interest rates. He writes: “If he follows through on his campaign promises of widespread tariffs and big tax cuts, the result would be upward pressure on inflation that would force the Fed to set interest rates higher than they would otherwise have been.”

While acknowledging the Fed's structural protections against political interference, Furman notes that the U.S. central bank now ranks in the bottom half of central bank independence globally, according to academic rankings.

He expressed concern about the potential for erosion of norms, especially if Trump's actions were continued by future presidents.

Furman concludes by emphasizing the importance of central bank independence: “Independent central banks are the closest thing to a free lunch that macroeconomists can offer. Decades of research have documented how independent central banks can achieve lower and more stable inflation and less severe business cycles without worsening unemployment or growth on average.”

See also: Mark Cuban calls Trump's lack of understanding of business 'foolish' and criticises threat of 200% tariffs on John Deere

Why is it important?Furman's concerns are not isolated. He recently questioned the logic behind Trump's proposed tariffs, highlighting the potential economic repercussions of such measures. In a post on unknownFurman asked: “Who do you think is going to pay for all the foreign tariffs that are being imposed in retaliation?”

In addition, several trade economists have criticized Trump's latest trade policy proposal, which includes a strong tariff on John Deere to move production to Mexico. Jonathan W. Coppessdirector of the agricultural policy program at the University of Illinois at Urbana-Champaign, said relocating jobs has serious consequences, but Trump's solution may not be effective.

What's more, Trump's plans for tax cuts, tariffs and deportations have attracted much attention for their potential to worsen inflation.

During a recent appearance at the Economic Club of New York, Trump confidently declared that tariffs would bring in “trillions of dollars” to the U.S. government, downplaying the cost of child care as “not very expensive” compared to the expected revenue from the tariffs.

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Disclaimer: This content was partially produced with the help of artificial intelligence tools and was reviewed and published by Benzinga editors.