Jared Bernstein, the chairman of President Joe Biden’s Council of Economic Advisers, issued a warning on Thursday that Donald Trump’s incoming administration could risk reigniting inflation by interfering with the Federal Reserve’s independence in setting interest rates.
Speaking to Bloomberg Television, Bernstein expressed concerns about Trump’s past comments suggesting greater executive control over the central bank. While acknowledging he was open to how Trump’s team would approach monetary policy, Bernstein emphasized that tampering with the Fed’s autonomy could be detrimental to controlling inflation. “Once you start messing around with Fed independence, I think you’re making a pretty fatal mistake in terms of controlling inflation,” he said.
Bernstein’s remarks came on the same day that Scott Bessent, Trump’s nominee for Treasury Secretary, testified before a Senate confirmation hearing. Bessent rejected concerns about Trump undermining the Fed’s independence, affirming that the incoming administration would discuss the bank’s policies much like congressional lawmakers do. “I think on monetary policy decisions, the FOMC should be independent,” Bessent stated.
Traditionally, U.S. presidents have refrained from commenting on Fed decisions to avoid accusations of political influence over interest rate settings. Despite this, Biden himself had avoided public comment on the Fed’s actions, even when Democrats criticized the central bank for its slow pace of rate cuts.
Bernstein stressed that the Biden administration is keenly aware of the dangers posed by compromising the Fed’s independence, particularly given the historical link between such interference and damaging inflationary pressures. He pointed to past economic missteps, where political meddling with the central bank’s decisions had led to severe inflation.
Though inflation had been a driving force in Trump’s rise to power, Bernstein noted that by the time Trump takes office, inflation is already moderating. Recent data, including a report showing cooling price pressures in December, have been welcomed by Fed officials. Additionally, Federal Reserve Governor Christopher Waller indicated that the central bank might reduce rates further in the first half of 2025 if the economic data remains favorable.
Looking ahead, Bernstein cautioned that Trump’s potential policies—such as sweeping tariffs, extensive tax cuts for the wealthy, and mass deportations—could fuel inflation. He added that if these measures were coupled with interference in Fed operations, the consequences could be severe.
“I don’t think they want to go there,” Bernstein said, underscoring the risks of undermining the Fed’s role in managing inflation.
In a lighter moment, Bernstein humorously hinted at his post-administration plans, remarking, “People ask me right now: what are you going to do after this job? One of the things I say is: I’m going to talk about the Fed.”
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