The collaborators of the populist Republican Donald Trump are discreetly working on a series of proposals that will seek to eliminate the independence of the Federal Reserve, the Central Bank of the United States, in case the magnate manages to return to power in the elections next November.
A report of The Wall Street Journal maintains that it is even analyzed that it is the president himself who sets the interest rates or that the FED decides it but with consultations and authorization of the Head of State. Is an unusual initiative which is unprecedented in modern American history.
The newspaper maintains that this development occurs in the midst of a deepening division among the magnate’s advisors over to what level the authority of the Central Bank should be challenged.
“Former Trump administration officials and other Republican supporters have discussed a range of proposals in recent months, from incremental policy changes to a risky claim that the president himself should play a role in setting interest rates.” , he points out.
He points out that the work is extremely secret to the point that some prominent former Trump economic advisors were not aware, presumably because of the reaction that the markets would have to such a measure, very common in some hyper-presidential populist governments in Latin America.
The measures are summarized in a document of about ten pages. There is the alternative that the new FED should consult decisions on interest rates with the government that would more vigorously use the Treasury Department (the Ministry of Economy) as control of the entity.
He adds that advisers suggest that if Trump returns to the White House, he should have the authority to remove Federal Reserve Chairman Jerome Powell before his four-year term ends in 2026. That would allow the president to place an official aligned with the interests of the Executive.
Donald Trump’s complaints
Trump has often said he prefers low interest rates and expressed frustration at not being able to influence them as president. According to the newspaper, the New York magnate has had informal conversations with advisors about possible candidates to head the Central Bank and has asked some people if they would be interested in the position.
“Trump has repeatedly complained, publicly and privately, about Powell, continuing a years-long campaign to discredit the man he himself chose to lead the Federal Reserve,” The Wall Street Journal highlights.
The Federal Reserve is a complex system in the United States that unites a public sector with a private sector to control, among other aspects, the cost of money and inflation as its best-known aspect.
The Board of Governors of the Federal Reserve System, based in Washington, is the public part. The private wing is supported by the 12 banks that make up the Reserve throughout the country.
It is an independent structure, protected by law, whose decision-making system is differentiated from the White House and the legislature. No official can operate in the FED. He also does not receive money from Congress. The head is appointed by the president, and from that moment on he is absolutely autonomous. It has operated this way since its creation in 1913.
The intention of the changes that Trump outlines with his advisors is a radical change and that the new direction of the FED includes the head of government as a whole.
“Under such an approach, the head (of the FED) would periodically seek Trump’s views on interest rate policy and then negotiate with the Committee to direct policy on the president’s behalf,” the report says.
The option is also being raised that the candidates to lead the Fed privately agree to consult informally with Trump. Others raise the bar even further by arguing that Trump himself could be part of the board of governors, an alternative that other advisors to the former president reject as implausible.
These speculations alarm Republican legislators closer to the liberal wing of the party, who observe the presidential candidate’s movements with some distrust. They evaluate as serious the costs that would be implied if investors suspect that manipulation by the Executive leads to higher inflation being tolerated. A deviation that would drive an increase in interest rates, including mortgages.
The divisions are powerful on the Republican side. To the point that a former official from the magnate’s last administration described the prospect of Trump influencing interest rates as “a horrible thought,” the newspaper maintains.
