Would Trump Move to Control the Fed?
An effort to give Trump more say on rates
This week, investors had planned to examine the latest inflation data, due out at 8:30 a.m. Eastern on Friday, for clues about when the Fed would start cutting interest rates. But they now have something potentially bigger to digest.
The Wall Street Journal reports that allies of Donald Trump are devising ways of watering down the central bank’s independence if he is re-elected president.
If true, that change would represent the biggest shake-up in U.S. monetary policy in decades. But it also raises questions about whether such a plan is possible — or whether Trump’s Wall Street supporters would back it.
Both big and small changes are on the table, according to The Journal, which cites unidentified sources. Among the most consequential would be asserting that Trump had the authority to oust Jay Powell as Fed chair before Powell’s term is up in 2025. While Trump gave Powell the job in 2017, he has since soured on his pick for raising rates, and has publicly said he wouldn’t give Powell a second term.
Smaller changes include allowing the White House to review Fed rules and using the Treasury Department to keep the central bank on a tighter leash.
The overall goal is to give Trump what he wants: more say on interest rates. Trump allies have discussed requiring candidates to lead the Fed to informally consult with him on such decisions and essentially act as the president’s advocate on the institution’s rate-setting committee.