White House pressure on the Fed risks stoking inflation and hurting markets, study findsPolitical interference in Federal Reserve policy tends to push inflation higher and weaken risk assets, according to a study cited by T.S. Lombard economists.The research, by economist Thomas Drechsel, tracks presidential interactions with the Fed using diary records and highlights episodes where the central bank clearly yielded to political demands—such as under Nixon before the 1972 election and during Lyndon Johnson’s presidency. From this, Drechsel built a "political pressure" index.T.S. Lombard says the study’s findings are especially relevant todayWhen the Fed eases policy under political pressure, inflation tends to rise persistently without a corresponding boost in real GDP—in fact, economic output often declinesThe study also shows that inflation expectations climb more sharply when the pressure is publicly visible and widely discussed in the media.The economists warn that any move to fire Fed Chair Jerome Powell or replace him with a loyalist could damage confidence in the Fed’s independence. “You’d have to take a very short-sighted view to think this is good for risk assets”adds that such a scenario could also hurt the U.S. dollar, especially in the eyes of global investorsthe likely winner would be the euro, backed by one of the most independent central banks in the world—the ECBVisit investingLive.com (formerly ForexLive.com) for additional, original views. This article was written by Eamonn Sheridan at investinglive.com.