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Donald Trump’s shocking 2024 election victory was largely attributed to one factor: voters’ feelings about the economy. Unsatisfied with the way the Biden administration had handled their money, and encouraged by Trump’s “America First” agenda, swing voters overwhelmingly reported in exit polls that they had voted for Trump with the economy at the top of their mind. Trump has long prided himself on being a businessman and being able to cut a deal with anyone. Famously, he has used this same logic in wars with Ukraine and Russia with limited success, but has proclaimed otherwise anyway. His favorite line throughout the campaign was pointing to the Biden economy inflation numbers and rambling on about the way the Biden-Harris Administration had failed the people.
Since taking over as President, though, Trump has found the inflation numbers stubbornly high, likely not helped by his tariffs driving the price of goods and services up. Many top analysts evaluate inflation through the Federal Reserve (the Fed) and how it treats interest rates every month. Interest rates are the tool that the Fed uses to manage, and by many standards, measure inflation. Adjustments impact national borrowing rates and, therefore, borrowing habits, as higher rates make it more expensive to borrow and are seen as a sign of high inflation, and lower rates encourage more borrowing and spending, which is seen as a sign of low inflation.
Historically, the Fed has been an apolitical body, independent of Presidential or congressional influence, but like most things with Trump 2.0, that norm has been challenged. Trump has repeatedly taken issue with the way they set rates, often lashing out when they raise rates, and calling for the chair or different members of the board to be fired. This is not normal behavior from a president, who is typically not overly concerned with the month-to-month Fed rate, but for Trump, who has led a very vibes-based presidency, the Fed’s actions are a personal attack.
Jerome Powell, the Fed chair, has often faced the wrath of Trump, who has infamously called for Powell’s firing over 40 times in his second term alone (that’s almost a weekly occurrence). An article published by the New York Times highlights the many threats Trump has posted ot his social media platform, Truth Social, including the many times he called on Powell to resign, which has given him a nickname like “Mr. Too Late,” or simply called him a moron. Beyond Trump’s odd obsession with the Fed chair, the President has begun to take very immediate interventionary steps at the Federal Reserve, an unprecedented move.
The Federal Reserve Board of Governors is the seven-member group at the Fed that decides on upcoming interest rate cuts or hikes, and has been historically independent of any political affiliation. Earlier this month, though, Trump took the previously unheard-of step of firing one of the people who sits on that board, Lisa Cook. Citing a loan filing error from 2021, Trump believed he had the power to fire her and choose her successor, someone who may make rate cuts at a more favorable margin for him. Separately, Trump has decided to appoint a new person to the board of governors, who is actively working in his administration, tying the President with the perception of economic movement more closely than ever before.
It is a dangerous step of Executive overreach, and sets a dangerous precedent of allowing the President to control the economic narrative. Trump has largely viewed the Fed rates as a reflection of the economy, to which he either attributes to himself or his predecessor, depending on how it is doing. Allowing a President to apply such political pressure to an institution that is going to make decisions that are going to impact American lives also risks a leader using people as pawns for a political agenda.
The Trump interference with the Fed’s decision-making is a slippery slope that cannot be permitted. In order to protect the economic interests of all Americans and to ensure the structural integrity of a prominent financial institution, the political influence of the Federal Reserve must cease, or the nation needs to look to a new way to manage such important decisions.
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