Fri, 16 Jan 2026

Fri, 16 Jan 2026 Trump's Fed fight looks like something from another country

Donald Trump's stand-off with the US central bank has recalled episodes in other countries - which ended badly for the economy.

* Redrado was fired in 2010 after resisting orders from President Cristina Kirchner to hand over reserves to pay off debts, a move he successfully challenged in court but eventually resigned due to "intolerable" pressure.
* The clash is seen as an early warning of Argentina's economic turmoil, which included high inflation and a currency plunge that the country is still recovering from.
* Trump has accused Federal Reserve Chair Jerome Powell of mishandling the economy and driving up debt costs by keeping interest rates too high, leading to interventions at the bank including attempts to sack a policymaker.
* Analysts say investors expect the Fed to be able to continue operating freely, but that faith will be tested in the coming weeks when the Supreme Court hears arguments about the policymaker's firing and Trump is expected to announce his pick to replace Powell.
* Economists have compared Trump's actions to those of leaders in emerging markets, describing it as a "banana republic" style of governance where central banks are subject to the whims of a ruling class.
* Experts warn that elected officials often try to use bank power for an immediate economic boost or to satisfy particular constituencies, even if it might hurt the economy over the long run.
* A study found that roughly 10% of central banks each year faced pressure from political leaders wanting lower interest rates, which can deliver a short-term economic boost but lead to higher inflation in the long term.
* Pressure on central bankers was most likely to emerge in countries with weaker institutions and rule of law, such as Argentina and Turkey.
* Analysts believe the US economy is unlikely to face severe fallout even if the Fed becomes a tool of the president, but some say there are already signs the fight is having consequences, including an 8% fall in the value of the dollar against a basket of currencies over the last year.
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