“King of Global Hedge Funds” Calls Out Trump: Don’t Undermine Fed Independence, History Shows the Danger!

Since Trump took office this year, most CEOs, institutions, and prominent brands have opted to “flatter” the president rather than criticize him. However, the “king of global hedge funds” appears to be a rare exception.  

 

Ken Griffin, founder and CEO of Citadel—the world’s largest hedge fund—co-authored an article that sharply criticizes Trump’s attacks on the Federal Reserve’s independence. The piece strongly supports the Fed’s freedom from undue administrative interference, sending a significant signal from the investment community to the White House.  

 

 

The article notes that runaway inflation during the Biden administration led to heavy Democratic losses in the 2024 election. President Trump and his administration naturally prioritize controlling inflation. Lower inflation would naturally result in lower interest rates. However, rhetoric and actions undermining Fed independence could exacerbate inflation and drive up long-term interest rates.  

 

“Public criticism of the Fed, suggestions to fire board members, and pressure on the central bank to adopt a more lenient stance on inflation come at a high cost. These actions raise inflation expectations, increase market risk premiums, and erode investor confidence in US institutions,” they wrote.  

 

 

For months, Trump has urged Federal Reserve Chairman Jerome Powell to lower interest rates. Last weekend, Treasury Secretary Scott Bessent blamed poor economic data on Powell’s reluctance to cut borrowing costs. Trump also fired the Bureau of Labor Statistics director following a disappointing jobs report, raising questions about the credibility of government data.  

 

Griffin, alongside University of Chicago professor Anil K. Kashyap, wrote, “The world’s most important central bank must be allowed to fulfill its dual mandate of ensuring employment and reducing inflation to a 2% target.”  

 

They warned, “If Trump forces the Fed to relinquish part of its authority, history has shown the dangers of doing so.”  

 

“In the 1970s, the White House pressured the Fed to artificially maintain low interest rates. As inflation accelerated and the Fed hesitated to tighten policy, prices soared for years, considered one of the Fed’s greatest failures,” they wrote.  

 

As of early this year, Griffin’s hedge fund managed over $65 billion. According to *Institutional Investor* magazine, since its inception in 1990, Citadel has generated $74 billion in profits for investors by year-end last year, making it the “most profitable hedge fund in history.” With its historical earnings surpassing Bridgewater and Ray Dalio’s retirement, Griffin has emerged as the top figure in the hedge fund industry.  

 

During last year’s US election, Griffin voted for Trump and is a major donor to Republican politicians. However, he later criticized Trump’s trade policies, warning they could damage America’s “brand” and its government bond market.  

 

While other executives, including JPMorgan CEO Jamie Dimon, have recently addressed the importance of Fed independence, none have directly named the White House.  

 

Griffin concluded, “In summary, these developments highlight risks reminiscent of political influence eroding institutional credibility in emerging markets. Though the US benefits from decades of accumulated credibility, it is not limitless.”