Mark Zandi

We know this from history.

I mean, our own history.

You can hear it on the Nixon tapes, the conversations between President Nixon back in the early 70s and his friend who was chair of the Federal Reserve, Arthur Burns, at the time.

And they kept rates lower than they would have otherwise in an effort to juice up the economy in the lead up to the 1972 election.

And by so doing, they laid the stage for the inflation that followed.

And it was a terrible time.

period of hyperinflation that ultimately ended in, you know, Paul Volcker coming in, slamming the economy with higher interest rates and pushing the economy into a deep recession.

There's a lot of other factors involved in that inflation in that very dark time.

But, you know, one key factor was the loss of Fed independence.

And, you know, we have experience overseas as well.

Other countries like Argentina, Turkey, even the British, the UK, you know, not only until recently the Bank of England was not independent and you could see it in their inflation statistics, their inflation numbers are higher.

So that's the outcome of a Fed or a central bank that loses independence.

The predisposition is going to be of the executive branches to keep rates low, to try to keep the economy moving and strong leading into an election.

and overdoing it, and the result will be inflation.

So that's kind of the direction of travel here, and so why this is such a disconcerting thing.

And, you know, hopefully the Fed can maintain some semblance of independence going forward.

No, not yet.

I think that's why investors are still kind of sitting on their hands waiting to see, because there's a lot of things that are going to transpire here in the next few weeks, few months.

One, obviously, is the president's going to nominate a new chair to the Federal Reserve, Chair Powell.

His term is up as chair in May.