Interest rate independence should fall
Trump confidants plan to overthrow Fed Chairman Powell
April 26, 2024, 4:19 p.m
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If Trump succeeds in returning to the White House, Fed Chairman Powell is likely to lose his position. According to insiders, the Republican’s entourage is already working on a “vision” to restructure the US Federal Reserve. The president would then have a say in future interest rate decisions.
According to a press report, Donald Trump’s entourage is working on proposals to undermine the independence of the US Federal Reserve if he returns to the White House. The Wall Street Journal, citing people familiar with the matter, reported that a small group of allies of the presumptive Republican presidential nominee drafted a nearly 10-page document outlining a policy vision for the central bank. Trump’s staff did not immediately respond to a Reuters request for comment.
The group argues that Trump should be consulted on interest rate decisions and would have the authority to remove Jerome Powell as Fed chief before the end of his term in 2026, the report continued. The newspaper has not yet been able to find out whether the ex-president knew about the efforts or even approved them. But some sources believed the work had received his blessing. Trump has already had informal discussions with advisers about possible candidates to head the Fed and asked people whether they would be interested in the job.
The Fed’s tight interest rate policy is wearing down investors
Trump had already signaled at the beginning of February that he would not grant Powell another term if he returned to the White House. He said at the time that he would not reappoint Powell if he won this year’s presidential election in November. Powell’s second four-year term as Fed chief expires in 2026. Trump said he believes Powell will cut interest rates to improve Democratic incumbent Joe Biden’s re-election prospects. Trump once brought Powell into office, but repeatedly criticized him massively for his allegedly too tight interest rate policy.
Investors on Wall Street find it grueling that the Fed has been putting off the interest rate cut longed for by the financial markets for months. They had hoped that the US interest rate turnaround would provide new impetus for the economy. However, Powell recently signaled that the tight monetary policy line would probably have to be maintained for longer in order to break the wave of inflation. The Fed, which will decide on the key interest rate again on May 1st, is currently keeping it in the range of 5.25 percent to 5.50 percent. There is now speculation on the markets that the first easing could not come until September.