Fiscal Dominance Fears Emerge as Political Pressure Mounts on Federal Reserve

US equities reached record highs this week amid growing concerns about political interference in monetary policy. President Trump's public criticism of Federal Reserve Chair Jerome Powell escalated to explicit demands for 1% interest rates—a move that WOULD save the government $1 trillion annually in debt servicing costs but risk triggering fiscal dominance.

The administration appears to be laying groundwork for Powell's replacement, with leading candidate Kevin Warsh reportedly willing to subordinate Fed independence to WHITE House priorities. Markets have yet to price in this institutional risk, despite economists' longstanding warnings about the inflationary consequences of central bank capitulation to fiscal demands.

Marble facades and personnel battles now oddly dictate monetary policy in what Powell's remaining 10-month tenure may become a last stand for central bank independence. The Breakdown newsletter's analysis suggests we're approaching—but haven't yet reached—the point of no return for fiscal dominance.