If he is elected to the US presidency again, Donald Trump wants to bring the US Federal Reserve under his control. The goal: low interest rates. Those around him are already working on plans for the period after a possible election victory.
The US Federal Reserve is still battling inflation, which is much tougher than expected. But a new challenge is already looming that could be just as fierce: Donald Trump. He could be re-elected president in November and return to the White House next January. And it looks like Trump will then escalate the campaign against the Fed that he waged in his first term.
As the generally well-informed Wall Street Journal (WSJ) reports, Trump’s advisors are working on proposals to undermine the independence of the US Federal Reserve if he is re-elected. The aim is for Trump to be able to influence interest rate policy.
Trump particularly has Fed Chairman Jerome “Jay” Powell in his sights. Trump brought him into office in 2018. But the central banker soon became the target of Trump’s Twitter tirades. The reason: Under Powell’s leadership, the Fed did not cut interest rates as much as Trump demanded. In view of the trade war with China that he escalated, Trump wanted low interest rates to give the US economy a boost. “My only question is: Who is our greater enemy, Jay Powell or the chairman [Chinas Präsident] Xi?” Trump raged.
In February of this year, Trump said in an interview that he would replace Powell if re-elected. The Federal Reserve Chairman’s current second term ends in May 2026. Trump accused Powell of being “political” and cutting interest rates to help “the Democrats” in the November elections. In order to bring high inflation under control, the Fed raised the key interest rate from almost zero to the range of 5.25 to 5.5 percent over the past two years. In view of the fact that inflation has now fallen significantly, the central bank has announced that it will lower interest rates this year.
Trump is already looking for Powell’s successor
According to the WSJ, Trump wants someone at the top of the central bank who will de facto treat him as a member of the interest rate committee known as the FOMC. The newspaper cites several people who spoke to Trump about the Fed. Trump’s wish: The Fed chief should regularly ask him for his opinion on interest rate policy and then try to enforce it in the committee.
Against this background, Trump’s entourage has two ideas for implementing this. Some of the advisers suggest that the candidates to succeed Powell would have to unofficially commit to speaking confidentially with Trump about the Fed’s decisions as central bank chief. Others even favor Trump becoming a direct member of the Fed leadership. Whether this can be implemented is also questioned by several Trump confidants.
Trump representatives did not deny the report to the WSJ. However, they emphasized that “announcements and political plans” can only be viewed as official if Trump or one of his representatives express them.
During his time as president, Trump repeatedly said that he wanted low interest rates. According to media reports, he was repeatedly annoyed with consultants that he could not influence the amount. Publicly, he called Powell “clueless” and the Fed “pathetic.” As the “WSJ” reports, Trump has already had several conversations with advisers about possible candidates to head the central bank and asked confidants whether they would be interested in the job.
However, the US President cannot simply install the head of the central bank. This appointment must be confirmed by the US Senate. Last time, the chamber blocked some of Trump’s controversial candidates for high Fed positions – including Judy Shelton, who is currently being considered as a possible successor to Powell. A third of the Senate will also be re-elected in November. Depending on what the composition looks like, it could be easier for Trump to install followers in the Fed. During the next US presidency, three top positions will be filled: In addition to the Fed chairmanship, the terms of office of the two vice presidents will also expire.