Fed Faces Risky, Inflationary Divorce from Treasury Post Covid
(Bloomberg) -- Breaking up is hard to do.The coronavirus has forged a once unlikely alliance between Donald Trump’s Treasury Department and the central bank he often derided. The close embrace is resurfacing concerns about the Fed’s independence in the long run.By openly urging Trump and Congress this week to spend more money fighting the pandemic, while promising to keep interest rates low, Fed Chairman Jerome Powell risks putting the central bank into a political box once the health emergency has passed.Government borrowing has skyrocketed during the crisis. The big worry is that Fed policy will end up being driven by the need to manage the costs of that debt –- preventing the central bank from taking actions, like raising interest rates for example, that the economy might otherwise require.“The Treasury and the Fed: Are they single, married or divorced?” asked former chief White House economist Glenn Hubbard, now at the Columbia...
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