Inflation Breakevens Signal Eroding Fed Independence

President Trump's public criticism of Jerome Powell underscores a growing tension between monetary policy and fiscal priorities. The traditional Fed mandate of stable prices and maximum employment is being overshadowed by demands to manage the US government's debt load. Lower interest rates, proponents argue, WOULD reduce interest payments on national debt and shrink the fiscal deficit.

This shift toward fiscal dominance—where monetary policy serves fiscal objectives—mirrors the 1940s era of yield-curve control. Jens Nordvig, founder of Exante Data and former Goldman Sachs managing director, highlights the risks of subordinating central bank independence to short-term fiscal needs. The interview, set for release tomorrow, delves deeper into these structural concerns.