Former U.S. Treasury Secretary Lawrence Summers warned that while financial markets have shown limited concern about Federal Reserve independence thus far, the situation "could change very rapidly."

"We are at the foot of a mountain of Fed credibility crisis, facing completely uncharted territory," Summers said. He referenced Trump's demands for the Fed to cut interest rates by approximately three percentage points and harsh criticism directed at Fed Chair Powell.

Summers emphasized that Trump attempted to remove board member Lisa Cook "without any due process" and noted reports suggesting Trump nominees might attempt to reorganize regional Federal Reserve bank leadership.

Summers described the current silence as "disturbing." He specifically called out financial industry leaders, saying they spend more time criticizing New York mayoral candidate and democratic socialist Zohran Mamdani. The former Treasury Secretary said he suspects the president's array of tactics against critics has raised "the cost of opposition."

Summers expressed concern that "the president's behavior is normalizing highly irresponsible conduct," with the "establishment" unable to resist and expose Trump's actions.

He noted that "markets have not yet shown dramatic reactions to Trump's moves against the Fed," but some warning signs have emerged.

This week, the yield premium of 30-year U.S. Treasuries over 10-year Treasuries rose to approximately 70 basis points, the highest level since inflation began surging in 2021. Thirty-year Treasuries are particularly sensitive to long-term inflation expectations, and if investors believe the Fed will prioritize keeping short-term benchmark rates low, inflation expectations could rise.

"We are playing with fire regarding inflation expectations. We have not yet seen substantial market reactions. But if psychology changes, the situation could change very rapidly," Summers said. He also noted that America's massive fiscal deficit creates additional pressure on financial markets.