Trump Says Presidents Should Have a Say on Fed Policy

Republican presidential candidate former President Donald Trump speaks during a press conference at his Mar-a-Lago estate in Palm Beach, Fla., on Aug. 8, 2024. (Joe Raedle/Getty Images)

Former President Donald Trump said, if reelected, he should have a “say” in the Federal Reserve’s policymaking decisions as it relates to interest rates.

While speaking at a roughly hour-long news conference at his Mar-a-Lago estate in Florida on Aug. 8, the Republican presidential nominee told reporters that “the president should have at least a say in there.”

Trump was critical of the U.S. central bank, saying that “it’s sort of gotten it wrong a lot,” citing his experience as a businessman.

“I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman,” he said. “I used to have it out with [Fed Chair Jerome Powell]. I had it out with him a couple times very strongly. I fought him very hard.”

Over the years, including in his first term in the White House and on the 2024 campaign trail, Trump has repeatedly criticized the Fed.

Last month, for example, during a wide-ranging interview with Bloomberg Businessweek, Trump said he would allow Powell to serve out the remainder of his term if he’s “doing the right thing.” He further noted that Powell and his colleagues should not lower the policy rate before the November election, adding that “it’s something that they know they shouldn’t be doing.”

Trump accused Powell of being “political” in a February Fox Business interview, warning that the central bank head might  “do something to probably help the Democrats ... if he lowers interest rates.”

Powell has regularly confirmed that he intends to stay at the Fed through the end of his term, which expires in 2026.

The Fed chief and other monetary officials have routinely stressed the importance of the body’s independence, and that the institution does not consider politics in its day-to-day operations.

“All advanced economies have adopted a policy of central bank operational independence, and that just means that we make our own decisions,” Powell said during his semiannual testimony at the Senate Banking Committee in July. “We’re instructed to make them without taking in extraneous factors, one of which would be politics, and the record is pretty clear that that’s a good, intentional arrangement that serves the public well.”

During an April 3 speech at Stanford University, Powell asserted that policymakers enact policies “that are not synchronized with election cycles” and decisions are not subject to reversal “other than through legislation.”

“This independence both enables and requires us to make our monetary policy decisions without consideration of short-term political matters. Such independence for a federal agency is and should be rare,” he said. “In the case of the Fed, independence is essential to our ability to serve the public.”

“The record shows that independent central banks deliver better economic outcomes,” Powell added.

Federal Reserve Chairman Jerome Powell speaks at a news conference following a Federal Open Market Committee meeting in Washington, on July 31, 2024. (Andrew Harnik/Getty Images)

Despite the emphasis on the Fed being free from politics, there have been discussions on how independent the central bank is, particularly in today’s climate.

Scott Bessent, the founder of Key Square Group, a global macro-investment firm, contended that “the Fed’s always political.”

“Jay Powell’s been political for his entire tenure, and he’s saying he’s not going to be political now,” he said in a Fox Business interview on Aug. 3. “I think if he wanted to not be political, he would indicate that there could be rate cuts after the election when President Trump wins.”

Political Pressures

This year, scores of Democrat lawmakers have urged the Fed to slash interest rates.

Following the weaker-than-expected July jobs report, Sen. Elizabeth Warren (D-Mass.) demanded Powell cut rates immediately.

“Fed Chair Powell made a serious mistake not cutting interest rates. He’s been warned over and over again that waiting too long risks driving the economy into a ditch,” Warren said in an X post on Aug. 2.

“The jobs data is flashing red,” she added. “Powell needs to cancel his summer vacation and cut rates now—not wait six weeks.”

The U.S. economy created a lower-than-expected 114,000 new jobs in July while the unemployment rate rose to 4.3 percent, which triggered the Sahm rule.

The Sahm rule, named after former Fed economist Claudia Sahm, says that when the three-month moving average of the jobless rate increases by 0.5 percent or more from its lowest level over the last 12 months, the economy is at the beginning of a recession.

In June, Warren and two other senators penned a letter to the Fed chair, pushing him to lower the benchmark federal funds rate from its current 23-year high range of 5.25–5.5 percent.

“The Fed’s monetary policy is not helping to reduce inflation,“ the upper chamber lawmakers wrote. ”You have kept interest rates too high for too long: it is time to cut rates.”

Warren and her Democrat colleagues in both congressional chambers have composed similar letters to the Fed leadership in recent months, requesting a reduction in rates.

The futures market expects the Fed to pull the trigger on a rate cut at the September policy meeting. However, according to the CME FedWatch Tool, investors are split on whether officials will employ a quarter-point or half-point rate cut.

The policymaking Federal Open Market Committee (FOMC) will hold its next two-day meeting on Sept. 29–30.

Meanwhile, House Financial Services Committee Chairman Patrick McHenry (R-N.C.) warned that the Fed’s independence is at risk, but the threats “are coming from inside the building.”

McHenry, who will be retiring from Congress at the end of his term, referred to the Basel III Endgame proposal as an example of the Fed’s regulatory and supervisory agenda becoming politicized.

“I urge you to reject outside political pressure in this volatile time and stay the course for the good of the American people and our economy as a whole,” McHenry told Powell at a July 10 hearing.

Basel III is a substantial regulatory capital overhaul blueprint that imposes new rules on the amount of capital banks must possess.