Pantheon Macro Warns: Government Intervention in Monetary Policy Has Far-Reaching Consequences; Trump Pressuring the Federal Reserve Has Historical Precedent
Pantheon Macroeconomics economist Samuel Tombs warned in his latest report that President Trump’s recent pressure on the Federal Reserve to cut interest rates reflects a dangerous historical cycle of government intervention in monetary policy. The institution reviewed two typical historical cycles: government intervention in the United States in the 1970s that led to hyperinflation, and the policy disaster caused by direct government manipulation of interest rates in the UK before the central bank gained independence in the late 20th century.
“During the period when the UK government manipulated interest rates, it triggered at least one catastrophic surge in inflation,” Tombs pointed out. “The lessons of politically driven monetary policy remain a warning to this day.” The report particularly emphasized that UK inflation soared to a historical peak of 21.9% in the 1980s, which was precisely the result of excessive government intervention. Analysts warned: “Trump will not be the first leader to gamble on monetary policy for short-term political gain—but history shows that such gambles ultimately come at a painful cost.”
Report data confirms that before the Bank of England gained operational independence in 1997, the country’s average annual inflation rate was as high as 6.5%; in the two decades after independence, this figure stabilized within the 2% policy target range. This stark contrast provides strong support for the current battle to defend central bank independence.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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