Donald Trump is intensifying his efforts to undermine the independence of the Federal Reserve, a move that could destabilize the US economy. The latest escalation involves a criminal investigation launched by the Trump administration into Fed Chair Jerome Powell, reportedly over renovations at Fed headquarters.
The Investigation and Backlash
On Sunday, news emerged that Trump’s administration had opened a criminal probe into Powell, who described the action as a deliberate attempt to pressure the Fed into lowering interest rates. This move has drawn criticism even from within the Republican Party, alongside widespread condemnation from former Fed chairs, Treasury secretaries, and economists across the political spectrum.
The Context of Control
Trump has long sought greater control over the Fed’s monetary policy decisions, specifically targeting Powell and board member Lisa Cook for removal. Under current regulations, Fed board members can only be fired “for cause,” a standard Trump has previously attempted to circumvent by fabricating criminal allegations. A similar attempt to remove Cook on unsubstantiated mortgage fraud claims in August is currently before the Supreme Court.
Why Independence Matters
The Federal Reserve operates as an independent central bank to ensure monetary policy is based on economic health, not short-term political gains. Trump’s actions threaten this independence, potentially jeopardizing long-term economic stability. Lowering interest rates can offer a temporary economic boost, particularly beneficial for a party facing midterm elections. However, excessive rate cuts risk inflation and economic crisis.
Broader Implications
The Fed’s independence is fundamental to maintaining public trust in financial institutions. By politicizing the Fed, Trump risks creating a precedent where monetary policy is dictated by presidential pressure rather than economic realities. This could lead to volatile markets, inflationary pressures, and a decline in investor confidence.
Additional News: MacKenzie Scott Donation
In other news, billionaire MacKenzie Scott has donated $45 million to The Trevor Project, the largest single donation in the organization’s history. This investment will significantly bolster LGBTQ+ suicide prevention efforts.
The Trump administration’s actions against the Federal Reserve represent a dangerous precedent. Undermining the independence of the central bank could have lasting consequences for the US economy and its global standing.
