Did Trump's pressure work? The Federal Reserve's hawkish stance shifts to rate cuts, and the independence of monetary policy is at risk!
Trump has finally gotten his wish. The Federal Reserve, long seen as 'unruly,' is now facing a moment of compromise with him. Recently, Fed Vice Chair Bowman suddenly shifted her stance, explicitly supporting three rate cuts within the year. This move appears to be a concession to Trump, but it actually reveals the dangerous situation of monetary policy being deeply infiltrated by politics.
As the most steadfast hawk within the Fed, Bowman had stated last year that 'no rate cuts would be considered before 2025.' Now, following Trump’s public threat to 'reorganize the entire Federal Reserve Board,' she has rapidly changed her position, even bypassing economic data to finalize the rate cut schedule for September. Behind this blatant political compromise lie three layers of deep calculations:
First, Trump’s judicial and personnel constraints have choked the Federal Reserve's throat. His newly appointed loyalist board members (Shelton and Waller) control key voting rights, and the Justice Department has secretly reignited its investigation into Bowman's husband's business fraud case to pressure her into submission;
Second, rate cuts have become an electoral tool. Three rate cuts could temporarily boost the stock market, mask the 8.2% inflation problem, and create momentum for Trump’s campaign, but it also sows the seeds for asset bubbles;
Third, technical independence has completely collapsed. While Bowman claims 'more evidence of cooling inflation is needed,' she simultaneously forcefully commits to a rate cut pace, a contradictory statement that even Wall Street analysts mock as 'a performance under a political teleprompter.'
However, the cost of this compromise is extremely heavy — if the rate cut is rushed in September, it may repeat the disastrous inflation triggered by loose policies before the 1976 election. The Federal Reserve’s exchange of its century-old credibility for temporary political security could completely end the myth of 'central bank independence.'
