Prof G Markets What Happens if the Fed is Compromised — ft. Claudia Sahm
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Oct 3, 2025 
Claudia Sahm, the Chief Economist at New Century Advisors and former Federal Reserve Section Chief, dives into the critical issue of Fed independence. She discusses the implications of potential politicization on inflation and economic stability. Claudia examines current vulnerabilities in the labor market and the impact of immigration on job creation. Plus, she analyzes the concentration in stock markets and the risks AI poses to economic growth. Finally, she explains her Sahm Rule, designed to provoke timely fiscal responses in times of recession.
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Who Really Sets Interest Rates
- Fed independence centers on who sets the federal funds rate: politicians or technocrats.
- Currently the Fed remains independent but that independence faces growing political threats.
Court Case Could Reshape Fed Power
- Attempted removal of Fed governors would weaken Fed autonomy and politicize policy.
- The Supreme Court decision on Lisa Cook's removal will be a pivotal test of those protections.
Watch For Politically Driven Low Rates
- Expect politicized central banks to keep rates artificially low to chase short-term growth.
- Monitor inflation risk if political pressure forces prolonged low rates.