The Wall Street Journal claims that a plan is being drawn up by former president Trump’s allies that would give him a direct say in setting interest rates, should he become president.
The Wall Street Journal published an expose on April 25 regarding a possible future for the Federal Reserve system. If former President Donald Trump regains the presidency, relations between the Federal Reserve and the President would be altered. Instead of maintaining the Fed’s current autonomy, Trump would have a say on interest rate decisions. He would also have the authority to remove the Chairman of the Federal Reserve. This includes removing current Chair Jerome Powell before his term ends in 2026.
The Fed would also find its independence fading through other means. The Treasury Department would be used as a check and balance in terms of the Fed’s bond-buying. Furthermore, rule-making by the Fed would become subject to Office of Management and Budget review.
Not official
The Trump campaign strongly replied to the article:
“Let us be very specific here: unless a message is coming directly from President Trump or an authorized member of his campaign team, no aspect of future presidential staffing or policy announcements should be deemed official,” Trump senior advisors Susie Wiles and Chris LaCivita told WSJ.
Relations between Trump and Powell were rocky during Trump’s presidency. In particular, he roundly criticized Powell’s interest rate decisions during the COVID-19 pandemic.
Current criticism
Since leaving office, Trump has been critical of the way the Fed has gone about trying to reach its 2% inflation target. He also claims that Powell is using the prospect of an interest rate drop as a political tool, and that he could decide to lower interest rates just before the election for political reasons.
Business Insider pointed to an interview with Trump on Fox News, in which he gave voice to his claim that the Fed was politicized.
"I think he’s going to do something to probably help the Democrats, I think, if he lowers interest rates," Trump said, adding that "it looks to me like he’s trying to lower interest rates for the sake of maybe getting people elected."
Powell has denied the allegations, and claimed that interest rate decisions are the result of “painstaking assessment” of where the economy should be going.
