Ken Griffin: "Undermining Fed independence will fuel inflation and raise long-term rates"

"If confidence in the Fed's ability to tackle inflation is undermined, the government will face enormous costs"

Also criticized the dismissal of the Bureau of Labor Statistics chief for damaging the credibility of economic statistics

There has been criticism from Citadel CEO Ken Griffin, a Republican supporter, and a professor at Chicago Booth School of Business that President Trump rattling the Federal Reserve risks undermining the Fed's independence, which would promote inflation and raise long-term interest rates.

On the 8th (local time), Ken Griffin and Professor Anil Kashyap of Chicago Booth School of Business wrote in a piece for The Wall Street Journal that the United States has built trust over a long period. They pointed out that "trust, once lost, is not easily restored."

They said that despite the benefits the U.S. gains from its strong economic foundation, it faces two major challenges: an unsustainable fiscal path and persistently high inflation.

For this reason, they noted that investor confidence in the central bank’s ability to address inflation without political interference is extremely important. They added that if such confidence is lost, the government could incur enormous costs. The risk premium on government debt held by investors would increase.

The authors also argued that President Trump's interventions and the recent dismissal of the Bureau of Labor Statistics chief have undermined the credibility of the government's official economic data. They said that trust in economic statistics is also something that must be built over a long time.

They noted that central bank independence is not a right of the Federal Reserve but something the central bank must earn and maintain through transparency, accountability, and performance.

They concluded that confidence in economic policy is built gradually by following and respecting procedures, but can be quickly lost if ignored. Maintaining confidence in economic policy lowers borrowing costs, supports growth, and preserves global trust, so confidence is a very important priority.

Ken Griffin, founder of Citadel, one of the world's largest hedge funds, is known as a Republican supporter but has opposed Trump's tariff policies and political pressure on the Fed.

President Trump has expressed his displeasure with various insults and threats of dismissal after Fed Chair Jerome Powell did not lower interest rates as he demanded.

He has already nominated Kevin Hassett, Chair of the White House National Economic Council; former Federal Reserve Board Governor Kevin Warsh; and current Federal Reserve Board Governor Christopher Waller as candidates to succeed Chair Powell, whose term expires in May next year.

However, Kevin Hassett, Chair of the White House National Economic Council, said it is important that the central bank maintain independence from political influence.

Kim Jeong-ah, guest reporter kja@hankyung.com