Nobel laureate economist Paul Krugman warned this weekend that former President Donald Trump’s effort to seize control of the Federal Reserve and press for lower interest rates poses a serious risk to the central bank’s independence and to the broader U.S. economy.
Speaking to MSNBC’s Ali Velshi and in a follow-up post on his Substack newsletter, Krugman criticized Trump’s public comments on monetary policy and said they were “horrifyingly irresponsible.” He said he regularly monitors Trump’s Truth Social feed and would not “allow [him] within three miles of making monetary policy.” Krugman added that the United States is experiencing “at least a mild case of stagflation,” a combination of elevated inflation, stagnant growth and rising unemployment.
Krugman said Friday’s jobs report was not comforting for Trump’s economic narrative and predicted the Federal Reserve will “for sure” cut interest rates next month — a move Trump has publicly demanded. He cautioned, however, that lower short-term rates would not fix the underlying economic problems and would not produce the “wonderful economy” Trump claims.
In his Substack post, Krugman argued that explanations for Trump’s push to slash rates should include both ignorance and political motive. He warned that reducing short-term rates could raise inflation expectations, which in turn could push long-term interest rates higher rather than lower. He also compared some of Trump’s enthusiasm for rate cuts to seeking a symbolic prize, saying Trump sometimes seems to view rate reductions as a “sort of trophy.”
Beyond those mechanics, Krugman said there is a deeper concern among economists: that Trump may be trying to establish what is known as “fiscal dominance.” Under such a regime, monetary policy would be constrained by fiscal priorities — namely, a desire to avoid politically painful choices on taxes and spending — rather than by the Fed’s dual mandate of low inflation and maximum employment. That shift, Krugman warned, would make it harder for the central bank to control inflation without yielding to political pressure.
Krugman tied the current state of the economy to policy choices he described as “self-generated” under a hypothetical second Trump term, saying ‘‘Trump-enomics’ has done this to us.” He argued that stagflation more commonly results from external shocks, but that policy missteps could produce similar outcomes.
Economists broadly view central-bank independence as a key tool in maintaining price stability by allowing monetary policy decisions to be made without direct political interference. Krugman’s remarks reflect long-standing concerns among some economists and policymakers that political pressure on a central bank can erode its credibility and complicate efforts to manage inflation expectations.
Krugman’s comments come as debate continues about the Federal Reserve’s near-term policy path and as political figures, including Trump, publicly discuss monetary policy and the Fed’s leadership. He urged caution about conflating short-term rate cuts with durable economic improvement and emphasized that decisions by the Fed interact with fiscal policy and market expectations in complex ways.