American economist Kenneth Rogoff says that the Federal Reserve’s autonomy is a lot more fragile than most people realize. The loss of the Fed’s independence, he warns, can lead to the return of price controls and financial repression, as was seen in the 1970s.

What Happened: On Wednesday, while appearing on the In Good Company podcast, Rogoff spoke extensively on the recent conflict between President Donald Trump and Fed Chair Jerome Powell.

Rogoff explains that the Fed’s independence is a “new thing,” something that came into being in recent decades. In the 1920s and 30s, he says, the Federal Reserve was a part of the Treasury Department and worked out of a small room in the Treasury.

The Harvard economist noted that, unlike the U.S. Supreme Court, the Federal Reserve is not enshrined in the Constitution and lacks the institutional protections afforded to bodies like the European Central Bank. As a result, he warned, "it could disappear in a week."

“By the way, it isn't just Trump who wants it to disappear; the left wants it to disappear too. They have all these plans--they want to, you know, have it print money and give it away to people,” Rogoff said.

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Rogoff points out that the Federal Reserve is under political pressure from across the spectrum, and there’s a real possibility of the Federal Open Market Committee, which votes on interest rate changes, being filled with individuals who maintain a dovish stance and always prefer lower interest rates.

Rogoff said, “I think there’ll be pressures… they’ll pack the central bank with people who we call doves. It hasn’t happened, but you know, it could. Obviously, we have Trump here, and he has said he thinks he’s smarter than the central bankers.”

Why It Matters: According to Rogoff, the Fed’s independence is largely a social contract or a political construct, and the institution itself can be restructured, repurposed, or even dissolved by Congress.

Several market observers and analysts have since called out Trump on his recent jabs at the Powell, warning that such a move could spark a dramatic rush to exit from U.S. assets.

Economist Nouriel Roubini has stated that forcing the Fed’s hand to cut rates is akin to “repeated own goals,” as the loss of the Fed’s independence would drive up bond yields, as the “Fed would be behind the curve in anchoring inflation expectations at a time of inflationary tariffs.”

Read More:

• Fed’s Jerome Powell Isn’t Budging On Rate Cut Despite Trump’s Bashing And Pressure -- Here’s Why

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