There is a long and well-documented history of politics influencing monetary policy, and every time it ends in some form of economic pain. We’re being reminded of that in Turkey as we speak, where government influence on monetary policy has collapsed the lira and unleashed awful inflation on Turkish citizens.

 For most of its history, the Fed has avoided any direct public political influence, but there’s a growing sense that political pressure could impact the Fed at today’s meeting (or in the coming weeks) and the result could be a policy mistake where the Fed talks very hawkish to show its tough on inflation, and in doing so spooks investors and the markets and creates a “Taper Tantrum 2.0.” Here’s what I mean.

It’s undeniable that the Fed has made a dramatic hawkish shift in its rhetoric over the past few weeks. Remember in early November the Fed declared it would start tapering QE at $15 billion/month and end QE in mid-2022 and maintain the flexibility to potentially slow tapering if needed. Meanwhile, Powell said rate hikes remained well off in the future (likely late 2022).