Why political attacks on the Fed in 2025 go beyond interest rates

What began as a throwaway remark by US Treasury Secretary Scott Bessent—accusing the Federal Reserve’s economic forecasts of being “pretty politically biased”—isn’t merely a political sideshow. It reflects a deeper institutional tension now taking shape within the US monetary framework. As the Trump administration intensifies pressure on the Fed to cut interest rates aggressively, questions arise not just about economic direction, but about central bank independence, credibility, and the future signaling function of policy projections.

This is not a story about a 25-basis-point pivot. It is a test of the structural scaffolding that underpins the world’s reserve currency—and the message it sends to sovereign allocators, foreign central banks, and inflation-targeting regimes across Asia and the Gulf.

In public remarks Wednesday, Bessent dismissed the Fed’s quarterly Summary of Economic Projections (SEP) as politically motivated. It was an unusual escalation, particularly given that the SEP is built on anonymous inputs from all 19 policymakers, and designed to signal consensus—not compliance. But Bessent’s tone aligns closely with President Trump’s ongoing demand for a 300-basis-point rate cut, a figure far beyond what even dovish Fed governors have floated.

Trump's handpicked appointees to the Fed Board—Michelle Bowman and Christopher Waller—have voiced support for limited easing, citing economic rationale. Yet even among those sympathetic to loosening, no one has echoed the extreme cut Trump is calling for. Fed Chair Jerome Powell has remained cautious, despite also being a Trump appointee. This public divide introduces a second-order problem: not just pressure on rates, but pressure on the signaling tools that define monetary guidance itself.

There is precedent for political nudging of the Fed—Reagan’s era saw backchannel pressures, and Nixon famously leaned on Arthur Burns. But what makes the current moment distinct is its scale and public formality. The SEP process, designed as a transparency measure post-2008, is being recast as a partisan device. This undermines both its function and its credibility.

Moreover, in prior episodes, pressure was largely limited to verbal nudges or executive displeasure. Today’s context includes direct funding leverage: earlier this year, the Trump administration suspended $400 billion in federal funding to Columbia University as a political message. The implied message to independent institutions is clear—credibility is no longer its own protection.

For Asia’s and the Gulf’s monetary authorities—especially those managing dollar pegs or imported inflation—the reliability of Fed signals remains a cornerstone for currency stability. If the Fed’s SEP becomes viewed as politically manipulated, it complicates everything from reserve alignment to FX hedging strategies.

This is particularly relevant for MAS in Singapore, which has relied heavily on calibrated appreciation bands and clear US signaling for forward guidance. Any erosion in the Fed’s independence risks a widening of divergence across central banks—forcing smaller economies to compensate with sharper, less gradualist policy moves.

In the Gulf, where rate movements tend to mirror the Fed to defend currency pegs, political interference introduces volatility that can't be absorbed domestically. Saudi Arabia’s SAMA and the UAE’s CBUAE both operate on the assumption of US institutional predictability. Destabilizing that rhythm risks capital outflows and undermines regional liquidity management.

The real asset the Fed manages isn’t just liquidity or inflation expectations. It’s credibility. That credibility is what allows forward guidance to act as a soft tool—steering behavior without triggering hard reallocation. When Treasury officials attack the neutrality of the SEP, they aren’t just disagreeing with the projection—they’re destabilizing its function.

In capital markets, perception is as valuable as pricing. Sovereign funds, insurance balance sheets, and global banks do not wait for actual rate moves; they adjust on the basis of expectation signaling. If Fed forecasts become politicized, yield curves risk becoming less predictive and more reactive—fueling volatility, mispricing, and divergence in institutional strategy.

The sharp public criticism of the Fed’s SEP does not signal a unified monetary direction. It signals that US monetary governance is entering a more adversarial phase—where institutional credibility is no longer protected by tradition, but contested in public discourse.

For allocators in Singapore, the Gulf, and other reserve-dependent economies, this isn’t just noise—it’s a structural reweighting of how much confidence can be placed in US signals. Monetary policy, once presumed insulated, is becoming part of the electoral ecosystem.

And that changes the risk calibration across more than just the US bond curve. It reshapes the way global actors price institutional stability itself.