Global Interest Rates: Trump Calls the Shots?
According to The Wall Street Journal, allies of former US President Trump are planning a project that would give him unprecedented influence over the Federal Reserve, surpassing the authority of the Federal Reserve itself. The project includes a proposal that would allow the US President to serve as a “proxy” member of the central bank’s board of directors.
Does Trump Hold Power Over Global Interest Rates?
This secret plan, outlined in a 10-page proposal, argues that if Trump returns to the White House, the Federal Reserve should seek his opinion when making interest rate decisions. Additionally, the proposal suggests that the Treasury Department should act as an additional oversight body to regulate the Federal Reserve’s bond purchasing activities.
Furthermore, the proposal grants the US President the power to remove current Federal Reserve Chairman Jerome Powell. It also requires that the Federal Reserve’s policies remain consistent with the government’s objectives. If this proposal is indeed formulated by the Trump team and Trump is reelected as US President in November, he will intervene in the traditional independence of the US central bank like never before.
In fact, during his previous presidency in 2018, Trump, who is now seeking reelection, openly criticized Powell and other central bank presidents for raising interest rates. He even considered dismissing Powell from his position, expressing regret for nominating him in the first place. Trump strongly criticized Powell for “loving rate hikes” and “severely impacting the US economy” in his public statements.
Publicly Criticizing Powell’s “Politicalization” of Decision-Making
In a recent interview with Fox Business, former US President Trump continued to criticize Powell, suggesting that he may announce interest rate cuts to help the Democratic Party win the upcoming US presidential election. However, Trump’s senior advisory team emphasized that any announcements regarding future presidential personnel or policies should not be considered official positions unless they come directly from Trump or authorized members of his campaign team.
There are still questions as to whether the President has enough power to implement such bold measures against the Federal Reserve, an institution that traditionally strives to maintain political neutrality. As of the time of writing, a spokesperson for the Federal Reserve has declined to comment on this report.