Wendy Edelberg

And he's no doubt extracting promises and somehow taking steps to make sure those promises stick with anybody who wants to be the next Fed chair.

And then maybe markets assume that other FOMC members, other members of the vote on interest rates will discipline Trump's chair pick because you need seven votes to change rates.

But I think the actions over the weekend should tell any bond holder that Trump has made it clear he will use all of his power in the executive branch to put pressure on FOMC members.

And he's got a whole bunch more tools in the toolbox that he has not yet used.

I worry about this a lot because credibility is easy to lose and really hard to get back.

If the Fed doesn't have credibility that in the long term they've got it, what's going to happen is that people are going to start to think, financial markets, households, businesses, everybody, you and me, we're going to start to think that inflation is going to remain high.

And we're going to start building that into our behavior today.

Well, my baseline is that Trump wounds the Fed but doesn't break it.

So maybe, you know, I'm at a five, which is really bad.

But I think the world will be recognizable three years from now.

I just think it will be worse.

It will mean that...

Inflation continues to creep higher.

Inflation expectations continue to go higher.

And all of this loose monetary policy probably gives us higher long term interest rates instead of lower long term interest rates.

And what that means is that the chair that follows after Trump's pick will have to have tighter monetary policy than otherwise to earn back that credibility.

Indeed, I do not.

And I think that this is a warning shot to anyone who might be in a position to set monetary policy over the next year.

Thank you.

Hillary Allen, a law professor at American University, says the Fed focuses on financial stability.