Bloomberg Talks Former Fed Vice Chair Lael Brainard Talks Pressure on Jay Powell
Jul 25, 2025
Lael Brainard, former Vice Chair of the Federal Reserve and director of the National Economic Council under President Biden, dives into the political pressures facing Jerome Powell. She discusses Trump's influence on the Fed's decisions and the risks of prioritizing government needs over inflation control. Brainard also emphasizes the importance of the Fed's transparency and accountability in maintaining market confidence while tackling the ongoing issue of 'mission creep' in its activities.
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Fed Chairs Resist Political Pressure
- President Trump pressures the Federal Reserve for lower interest rates to support his economic agenda.
- Fed chairs are historically remembered for adhering to mandates, not yielding to political pressure.
Debt Service Drives Rate Pressure
- Trump's desire to lower rates ties directly to reducing debt service costs on national debt increases.
- This fiscal dominance risks undermining the Fed's inflation-fighting credibility.
Market Reacts to Fed Credibility Concerns
- Markets reacted negatively to threats against Fed independence with rising long-term yields and a weakened dollar.
- The recent calming reflects the president backing down and showing some respect for the Fed chair.