{"id":10720,"date":"2025-08-02T16:44:55","date_gmt":"2025-08-02T13:44:55","guid":{"rendered":"https:\/\/harici.com.tr\/en\/?p=10720"},"modified":"2025-08-02T16:44:55","modified_gmt":"2025-08-02T13:44:55","slug":"from-the-fed-to-esenyurt-the-political-anatomy-of-interest-rates","status":"publish","type":"post","link":"https:\/\/harici.com.tr\/en\/from-the-fed-to-esenyurt-the-political-anatomy-of-interest-rates\/","title":{"rendered":"From the Fed to Esenyurt: The Political Anatomy of Interest Rates"},"content":{"rendered":"

Being an enemy of Donald Trump isn\u2019t all that difficult. The media, immigrants, Greta Thunberg, even wind turbines have all landed on his blacklist. But there\u2019s one figure Trump considers even more dangerous than Xi Jinping: Jerome Powell. Yes, the Chairman of the Fed \u2014 that is, the head of the world\u2019s most powerful central bank. A figure who not only determines the course of the U.S. economy, but also shapes everything from interest rates to exchange rates, borrowing costs to capital flows in global markets. In Trump\u2019s eyes, just another technocrat who does nothing but raise interest rates.<\/p>\n

Trump\u2019s anger at Powell reached its peak in the summer of 2025 and has turned into a full-on social media meltdown. On his own platform, Truth Social, Trump called Powell \u201ca total and complete moron.\u201d Then he branded him \u201cvery dumb,\u201d \u201chard-headed,\u201d and following a rate decision, simply \u201cstupid.\u201d Not stopping there, Trump went a step further and declared Powell \u201ca major loser,\u201d attacking not only his policy but his persona. In short, Powell has become the main political \u2014 and psychological \u2014 punching bag of Trump.<\/p>\n

But what\u2019s really behind this clash? And why does it concern not just Washington, but also Ankara, Gaziantep\u2019s industrial zone, or a home loan in Esenyurt, Istanbul?<\/p>\n

What Is the Fed, and What Is It Not?<\/strong><\/p>\n

The Federal Reserve \u2014 or the Fed, for short \u2014 is the central bank of the United States. Established in 1913, its mission is to ensure financial stability, manage monetary policy, supervise banks, and, of course, control inflation.<\/p>\n

Its institutional structure is somewhat complex and quite different from Turkey\u2019s central bank: The Fed consists of 12 regional reserve banks and a Board of Governors in Washington. The Chair (currently Jerome Powell) leads this board, and is appointed by the U.S. President, though Senate confirmation is required. The term is 4 years, renewable. Importantly, the Fed generates its own budget and does not receive direct funding from the U.S. Treasury \u2014 which grants it financial autonomy.<\/p>\n

So, it\u2019s not formally subordinate to the government, but it isn\u2019t fully independent either, since its leadership is politically appointed. This makes it both a powerful and controversial institution.<\/p>\n

But here\u2019s the crux: the U.S. dollar is the global trading currency. About 60% of the world\u2019s foreign exchange reserves are held in dollars, and roughly half of global trade is conducted in dollars. The prices of essential commodities like oil are also set in dollars. As such, the Fed\u2019s interest rate decisions impact not just the U.S., but the entire world.<\/p>\n

When the Fed raises rates, the dollar appreciates. This increases borrowing costs for developing countries and accelerates capital flight. In countries like Turkey, which carry large amounts of foreign debt, it leads to currency shocks, inflation, and upward pressure on domestic interest rates. In other words, a single sentence from Powell can raise the price of tea in a back alley teahouse in Istanbul.<\/p>\n

Trump vs. Powell: The War on Interest Rates<\/strong><\/p>\n

In 2025, Trump is back in the Oval Office, and he sees economic management as part of his personal show. He wants to supercharge the economy. In his eyes, that depends on one thing: LOW INTEREST RATES.<\/p>\n

Powell, however, points to the inflationary pressures of Trump\u2019s tariffs and says, \u201cInflation expectations remain high; therefore, we must keep rates steady.\u201d One wants to press the gas pedal, the other the brakes. For Trump, that\u2019s unacceptable. To him, a central banker who raises rates is a \u201ctraitor to the economy.\u201d<\/p>\n

But Powell\u2019s concern isn\u2019t just Trump \u2014 it\u2019s defending the Fed\u2019s \u201cindependence.\u201d This is where the ideological and theoretical stakes become clear.<\/p>\n

Central Bank Independence: Myth or Reality?<\/strong><\/p>\n

Since the 1980s, central bank independence has become a cornerstone of neoliberal economic thought.<\/p>\n

Its theoretical foundation lies in Kydland and Prescott\u2019s \u201ctime inconsistency\u201d problem and Barro-Gordon\u2013style rational expectations models. Turkey\u2019s post-2001 monetary regime also leaned heavily on this framework: inflation targeting combined with central bank independence was presented as a stabilizing, neoliberal cure-all.<\/p>\n

The argument was that elected politicians would always be tempted to loosen monetary policy for short-term gain, so monetary decisions should be left to technocrats. Thus, the idea that central banks must be \u201cindependent\u201d to ensure inflation control became an unquestionable dogma.<\/p>\n

Supposedly, these technocrats would base their decisions on data, not political pressure. But a closer look reveals that these decisions often systematically benefit specific interest groups.<\/p>\n

A Critical Perspective: Independence for Whom?<\/strong><\/p>\n

From a critical political economy viewpoint, central bank \u201cindependence\u201d is often not about neutrality \u2014 it\u2019s about institutionalizing class power.<\/p>\n

What\u2019s presented as \u201cindependence\u201d is often a policy framework that\u2019s closed to the demands of workers but wide open to the expectations of financial capital.<\/p>\n

When central banks raise rates in the name of fighting inflation:<\/p>\n