[ad_1]
But the bigger question now is not how the central bank will operate under Trump, but whether it will continue to operate at all.
Elon Musk, a key Trump backer who is expected to play a significant role in shaping Trump’s policies, included a “100” emoji as he reshared Republican Sen. Mike Lee of Utah’s post on Xu calling for the Fed to be abolished.
“The executive branch should be under the leadership of the president,” Lee said in a post on X on Thursday, hours after Fed Chairman Jerome Powell told reporters he would not resign if Trump asked him to.
“The Fed is one of many examples of how we’ve deviated from the Constitution in this regard,” Lee added.
“Another reason why we should #EndTheFed.”
Asked where Trump stands on the matter, Trump-Vance transition spokeswoman Karoline Leavitt told CNN, “Policy should only be considered official if it comes directly from President Trump.”
Calls to abolish the Fed are nothing new. Former congressman Ron Paul, who ran for president once as a libertarian and twice as a Republican, published a book in 2009 titled “End the Fed.”
Then in June, Republican Rep. Thomas Massie of Kentucky and Lee introduced corresponding legislation aimed at uprooting the nation’s central bank and shifting its responsibilities to the Treasury Department.
But so far, Trump has not publicly expressed his support for dissolving the Fed. In the campaign, however, he advocated changing the rules of the central bank, to the dismay of many economists.
Challenging the independence of the FED
“The American people re-elected President Trump by a wide margin, giving him a mandate to carry out the promises he made on the campaign trail. He will deliver,” Leavitt said in an emailed statement to CNN.
Those promises include “lowering” interest rates, which Trump promised to do if elected at the National Association of Black Journalists’ annual conference in August. Presidents, however, have no direct influence on the rates Americans pay to borrow money.
For more than 70 years, it has been the central bank’s duty to set rates at levels aimed at fulfilling its congressional mandate for price stability and maximum employment. And throughout that time, Congress has also guaranteed the Fed’s ability to operate as an independent body, free from any political interference.
This has empowered Fed officials to make interest rate decisions that are not necessarily popular but could help the nation’s economy in the long run.
For example, central bank leaders have resisted calls for lower rates, opting instead to hold rates at their highest level in two decades for a year to curb stubborn inflation. It wasn’t until two months ago that they finally cut rates as inflation cooled to barely below the Fed’s 2% target.
But during the campaign, Trump talked about it by asking Fed officials to consult with him on interest rate decisions. That could put pressure on Fed officials to keep rates lower to accommodate Trump’s wishes, which in turn could reignite inflation.
During his first term, Trump also threatened to fire or demote Fed chief Jerome Powell, whom he has occasionally accused of keeping interest rates too high.
It is unclear whether Trump has the legal authority to independently review the Fed’s independence, let alone at all, or to remove Fed appointees before their terms expire.
On the latter, Powell, a lawyer himself, made his point clear when asked by a reporter at a news conference last week following the Fed’s two-day monetary policy meeting.
“The law is not allowed,” he answered briskly.
That’s because the head of the U.S. central bank can only be fired “for cause,” as outlined in the Federal Reserve Act. The exact interpretation of what would constitute a dismissal for cause is not precisely defined, but it is reasonable to assume that it would entail much more than mere policy differences with the president.
A Fed spokesman declined to comment.
If there is a time for Trump to test the Fed’s ability to maintain the status quo, it would probably be 2025.
Although the balance of power in the House of Representatives has not been determined, the Republicans have a majority in the Senate.
In addition, six of the nine Supreme Court justices were appointed by Republican presidents, and half of those six were appointed by Trump in his first term.
But anyone challenging the Fed in the nation’s highest court shouldn’t necessarily expect to emerge victorious. In a 7-2 ruling this year, the Supreme Court ruled that the Consumer Financial Protection Bureau can continue to operate in its current form despite many arguments from Republican lawmakers that its structure is unconstitutional.
And last month, the court refused to hear a case that threatened to disband the independent Consumer Product Safety Commission.
Like the officials who sit on the Fed’s Board of Governors, members of the Consumer Product Safety Commission’s board can only be removed by the president for cause.
[ad_2]