Donald Trump’s feud with the Federal Reserve has an ugly precedent — Turkey.

Earlier this week, Federal Reserve Chair Jerome Powell told the world that the Department of Justice had subpoenaed the central bank and threatened him with a criminal indictment.

What for? To pressure Powell to drop interest rates, he said — something the agency did twice last year.

Trump has repeatedly criticised the Fed for keeping rates high, arguing the decision has hurt housing affordability and economic growth.

But that goading echoes a playbook repeated myriad times by Turkey’s President, Recep Tayyip Erdoğan, according to André Dragosch, European head of research at Bitwise.

“We could see an ‘Erdoganisation of the Fed’ with increasing political pressure exerted by the Trump administration on the Federal Open Market Committee and ultimately on US monetary policy,” Dragosch told DL News.

For Dragosch, Turkey is the canary in the coalmine.

Turkey’s hyperinflation

Erdoğan and his country’s central bank have had skirmishes since July 2019.

Back then, Erdoğan fired central bank governor Murat Çetinkaya for resisting rate cuts, replacing him with a more compliant successor, triggering an immediate sell-off in the lira.

“The interesting thing is that Çetinkaya was already considered relatively aligned with the presidency, but apparently even that wasn’t enough,” Alper Alkalin, founder of Turkish financial advisory firm Akalin Finance, told DL News.

“Even loyalists weren’t loyal enough if they insisted on orthodox monetary policy.”

But the more dramatic episode came in March 2021, when Erdoğan abruptly dismissed reform-minded governor Naci Ağbal — just four months after his appointment — and installed Şahap Kavcıoğlu, a vocal critic of high interest rates.

The lira plunged by as much as 15% in a single day against the dollar, one of its worst moves on record.

“The floodgates opened,” Akalin told DL News. “From mid-2018 through 2021, the lira lost about 75-80% of its value against the dollar. It became such a cultural phenomenon that people were creating memes comparing the lira’s depreciation to random objects — the lira always lost more.”

Moreover, because Bitcoin is priced globally in dollars, the currency collapse sent Bitcoin-denominated prices in lira sharply higher, even without a major move in the top crypto itself.

Meanwhile, domestic trading volumes and interest in crypto surged as Turks rushed to protect their purchasing power.

“Turkey became one of the highest adoption markets globally during this period,” Akalin said. “But it wasn’t just crypto. When the traditional path to building wealth collapsed, people turned to any alternative speculation vehicle they could find.”

The Turkish precedent matters because the mechanics are similar.

Political pressure on central banks to cut rates creates inflation, weakens the currency, and drives citizens toward alternative stores of value. If Trump successfully pressures Powell into rate cuts against the Fed’s judgment, the US could follow a similar — albeit slower — trajectory.

Weaker dollar

If Trump’s pressure is successful, it could permanently scar the agency.

“Once you’ve demonstrated that central bank independence is negotiable, it’s very hard to convince markets it’s not anymore,” Akalin said.

There’s more. Trump’s pressure campaign could backfire, in turn fuelling a Bitcoin rally. While forcing rate cuts might boost stocks temporarily, it would undermine confidence in the dollar as the global reserve currency.

“At the very least, a decrease in Fed independence implies structurally higher rates of inflation and a weaker dollar in the future,” said Dragosch.

And Bitcoin? An explicit end to the Fed’s independence “is definitely bullish since dollar weakness tends to be associated with a positive Bitcoin performance,” Dragosch said.