For Citadel CEO Ken Griffin, the political implications of still-elevated inflation are not lost on him.
But inflation has been sticky as tariffs take hold, and Griffin predicted inflation will continue to be in the mid-2% to 3% range next year, still above the Fed’s 2% target.
“There’s no doubt that the president and the Republicans came to power on the back of frustration with inflation,” Griffin said. “I would not underestimate how grating a 3% inflation rate could be to tens of millions of American households.”
Inflation could feature heavily in midterm elections next year, as the Republican Party looks to defend narrow majorities in the House and Senate. And voters are souring on Trump’s economy.
Griffin advised that continued Fed independence would be in Trump’s interest.
“If I were the president, I would let the Fed do their job,” he said. “I would let the Fed have as much perceived and real independence as possible, because the Fed often has to make choices that are pretty painful to make.”
Still, President Donald Trump has been vocal about cutting rates further, even though the move likely will risk further price increases.
Griffin warned that erosion of Fed independence could lead to Americans conflating the White House and central bank.
“If the president’s perceived as being in control of the Fed, then what happens when those painful choices have to be made?”
