Former US Treasury Secretary Warns Trump Fed Rate Cuts Risk Inflation

President Donald Trump is advocating for significant cuts to Federal Reserve interest rates to stimulate the economy ahead of the 2026 midterm elections, a move widely criticized for risking long-term inflation and economic instability. Federal Reserve officials, including Chair Jerome Powell, have resisted lowering rates prematurely due to persistent inflation above the 2% target. Former Treasury Secretary Lawrence Summers and other mainstream economists warn that drastically cutting rates to around 1% could trigger 'massive inflation psychology,' ultimately increasing long-term borrowing costs despite a short-term economic boost. Internationally, incoming European Central Bank Governing Council member and Austrian central bank Governor Martin Kocher has expressed concern that Trump's attacks on Fed independence threaten price stability, highlighting the risk of politicizing monetary policy to reduce government debt costs. Critics argue that such policies resemble using credit irresponsibly, with leaders like Hakeem Jeffries, Charles Schumer, Janet Yellen, and Lawrence Summers urged to vocally oppose the president's approach. Overall, the consensus among economists and central bankers underscores the dangers of undermining Federal Reserve independence to achieve short-term fiscal gains.