Republican US presidential candidate Donald Trump appeared to soften his stance on interfering in the Federal Reserve’s policy decisions, saying he believed he had the right as president to tell the Fed what he thought it should do about interest rates, but that he would not order such action.
“I think I have the right to say that I think interest rates should be raised or lowered a little bit. I don’t think I should be allowed to order it, but I think I have the right to comment on whether interest rates should be raised or lowered,” the former president said in an interview with Bloomberg News at the Chicago Economic Club.
In previous comments, Mr. Trump had been more explicit that he believed presidents “should have at least (a) say” in the Fed’s interest rate decisions.
How Mr Trump would treat the US central bank if he wins a second four-year term as president has sparked intense interest in business circles and on Wall Street following reports earlier this year that a group of Mr. Trump’s allies had drafted proposals aimed at eroding the Fed’s independence if he won office. The group’s proposals said Mr. Trump should be consulted on interest rate decisions and that the Fed’s proposed banking regulations should be submitted for review to the White House.
The Fed chairman and six other members of its board are appointed by the president and must be confirmed by the Senate. The presidents of the 12 regional Fed banks are chosen by their own boards of directors, subject to approval by the Fed board.
However, the Fed enjoys significant operational independence to make policy decisions that exert considerable influence on the direction of the world’s largest economy and global asset markets.
The Fed’s ability to set monetary policy alone, without political control, is one of the keystones of the US dollar’s stature as the world’s reserve currency, for example. This status, in turn, is key to allowing the U.S. government to borrow almost unchecked from global bond markets at relatively low interest rates, despite carrying $35 trillion in debt, dubbed the “exorbitant lien.” .
In Tuesday’s interview, Mr. Trump declined to directly answer a question about whether he would try to oust Fed Chairman Jerome Powell, whom Mr. Trump first nominated to run the bank US central bank – and then berate Mr. Powell and threaten to remove him from office for raising interest rates.
“I did it because he was keeping rates too high, and I was right,” Mr. Trump said of threats he made during his tenure in the White House to try to to remove Mr. Powell from office.
Mr. Trump or his Democratic White House rival, Vice President Kamala Harris, will have the opportunity to appoint a new Fed director when Mr. Powell’s term expires in 2026.
