The last days of Fed independence?

[WASHINGTON, DC] With US President Donald Trump once again ratcheting up pressure on the Federal Reserve, this time with a criminal investigation of Fed chair Jerome Powell, the end of central-bank independence may be at hand – at least in the United States. And this threat comes at a time of growing risks to price stability, and has made financial markets exceptionally jittery.

Trump’s threats against Powell, and the Fed as a whole, are not to be taken lightly.

Inflation is a slow-moving disaster. Like the apocryphal frog placed in gradually heating water, it does not feel uncomfortable at first. But just as the frog doesn’t recognise the danger of the water heating to a boil until it is too late to jump out, the pain of inflation often goes unnoticed until rising prices are firmly baked into the economy.