Allies of former President Donald Trump are reportedly preparing proposals that could potentially diminish the Federal Reserve's independence if Trump secures a second presidential term, a move that reflects a growing divide among his advisers on how much to challenge the Fed's authority.
According to the Wall Street Journal, recent discussions among former Trump administration officials and supporters of the Republican frontrunner have generated a variety of suggestions, ranging from minor policy tweaks to more extreme ideas, such as proposing that the president should have a say in setting interest rates.
Per the report, a confidential 10-page document, drafted by a small group of Trump's allies and unknown to even some key former economic advisers of Trump, lays out their vision for the central bank.
Specifically, the document allegedly advocates for presidential consultation on interest rate decisions and suggests that the Fed's regulations be subjected to White House review. It also proposes using the Treasury Department to exert more control over the Federal Reserve.
Moreover, the group believes Trump could have the authority to remove Jerome Powell as Fed Chair before his term ends in 2026, although Powell would likely remain on the board of governors.
While it is unclear if Trump is aware of these efforts, insiders believe that the former president has endorsed these plans, the report says.
“Let us be very specific here: unless a message is coming directly from President Trump or an authorized member of his campaign team, no aspect of future presidential staffing or policy announcements should be deemed official,” Trump’s senior advisers, Susie Wiles, and Chris LaCivita, said in a statement.
Trump, known for his preference for low interest rates and previous frustrations over his limited influence on them, has not finalized his approach to the Fed if re-elected. His current focus remains on the upcoming election, his ongoing legal issues, and choosing his vice president.
Still, the former US president has informally discussed potential candidates to lead the Federal Reserve and queried associates about their interest in the role, expressing dissatisfaction with Powell, whom he appointed.
Discussions have also touched on an unusual suggestion that the Fed Chair could consult Trump as if he were a non-official member of the rate-setting committee. This would involve the chair seeking Trump’s input on policy decisions and negotiating with the committee to align with Trump's preferences.
Some advisers are even considering making it a requirement for Fed Chair candidates to agree to such informal consultations.
However, these discussions have concerned advisers who favor a traditional, independent role for the Fed, as well as Republican lawmakers.
They believe that political interference might lead to investor concerns about the central bank's commitment to controlling inflation, potentially resulting in higher long-term interest rates across various forms of debt.
One former Trump official described the idea of Trump influencing interest rates directly as a "horrifying thought."
“Given their charge, their independence is critical to doing it in an unbiased, nonpolitical way,” said Republican Senator Kevin Cramer, who claims he would oppose efforts by any president to challenge the Fed’s autonomy.
“There’s a reason that there’s not just one decision maker—that there are safeguards built into a board of governors.”
A draft document by advisers to former President Trump proposes, among other things, subjecting the Fed to the same regulatory review processes as other executive branch agencies via the Office of Management and Budget.
Further, the document calls for the Treasury Department to have a greater oversight role in any emergency lending programs conducted jointly with the Fed.