Trump’s Battle with the Fed Escalates! Wall Street Warns: Rising Risk of Stagflation in the U.S.

The U.S. economy appears to be one step closer to its worst-case scenario.

Komal Sri-Kumar, president of U.S. macroeconomic consulting firm Sri-Kumar Global Strategies, blamed President Trump’s recent escalation of his conflict with the Federal Reserve, including his attempt to fire Fed Governor Lisa Cook on Tuesday.

Sri-Kumar stated that the likelihood of stagflation is now higher. Stagflation is a dreaded scenario where inflation accelerates while economic growth slows.

He pointed to the recent rise in long-term U.S. bond yields, which he believes indicates that investors are preparing for heightened inflation in the future. He noted that, coupled with signs of economic weakness, stagflationary conditions are brewing.

The overwhelming consensus is that replacing Cook—an action with almost no historical precedent—would further undermine the Fed’s independence. Sri-Kumar stated that the market would resist any further development in Cook’s removal by selling bonds and pushing yields higher, which is precisely the opposite of what Trump hopes to achieve.

"We are heading toward stagflation, where a recession occurs alongside significantly rising inflation," Sri-Kumar said. "What could prevent this? An immediate policy reversal. A return to the past, where the Fed remains independent. But we see no prospect of that happening."