'Paranoia is MAGAworld’s normal condition': Paul Krugman predicts 'Trumpist attacks on the Fed'

With the Federal Reserve expected "to start reversing the sharp [interest] rate hikes it carried out beginning in March 2022," economist Paul Krugman predicts in a Monday, January 8 New York Times op-ed that "[Donald] Trumpist attacks on the Fed for cutting interest rates are coming."

"What I don’t know is whether the Fed is ready for the political firestorm it’s about to face, and whether it will stand up to the pressure to keep rates too high for too long. Because it’s a safe prediction that Donald Trump and his supporters will scream that the coming rate cuts are part of a deep-state conspiracy to re-elect President Biden," Krugman writes.

The longtime NYT opinion columnist notes, "In a recent dialogue with me about the economy, my colleague Peter Coy suggested that the Fed may be inhibited from cutting rates because it’ll fear accusations from Trump that it’s trying to help Biden. I hope Fed officials understand that they’ll be betraying their responsibilities if they let themselves be intimidated in this way."

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He also emphasized, "I hope that forewarned is forearmed. MAGA attacks on the Fed are coming; they should be treated as the bad-faith bullying they are."

Krugman writes:

I don’t know what the unemployment rate or the rate of economic growth will be in November, but because monetary policy works with a lag, what the Fed does in the next few months won’t have much effect on these numbers.

Biden, however, is already presiding over a very good economy by normal standards, with solid job growth and plunging inflation. What he needs is for more Americans to accept the good news. And Fed rate cuts will help him with that. They will signal to the public that inflation really is under control; they will lead, other things being equal, to higher stock prices and lower mortgage rates.

So we can expect howls from Trump and his allies that politics, not economics, is driving the coming rate cuts — even though Trump himself appointed Jerome Powell, the Fed’s chair.

"Trump and his allies constantly engage in projection, assuming that their opponents are doing or will do what they themselves would do or have done, like weaponizing the Justice Department for Trump’s own political ends," the distinguished professor at the City University of New York Graduate Center emphasizes. "And when it comes to interest rate policy, Trump has a track record of doing exactly what I’m sure he will accuse Biden of doing: trying to manipulate the Fed."

He writes, "Why do we know this will happen? Partly because paranoia is MAGAworld’s normal condition: It sees sinister conspiracies everywhere."

READ MORE: Paul Krugman: Why the economy 'may be better for Democrats' than pundits think

Krugman's full op-ed is here (subscription required).