This is the subject of my latest Bloomberg columnhere’s a bit:
Trump’s advisers have drawn up plans to significantly limit the Fed’s operational autonomy. The Trump campaign has disowned these plans, but the general ideas have spread in Republican circles, as evidenced by the Heritage Foundation report. Project 2025 report. Trump himself called for a policy of weakening the dollar, which could not be carried out without a certain degree of cooperation from the Fed. As a former businessman and real estate developer, Trump seems to care most about interest rates, the banking industry and currencies.
A concrete proposal reported in The Wall Street Journal would require the Fed to informally consult with the president on decisions regarding interest rates and other major aspects of monetary policy. This would make it more difficult for the central bank to commit to an overt policy of disinflation, as the president’s continued influence would be an unpredictable factor in the decision. Presidents would likely pay more attention to their own re-election prospects than to the advice of Fed staff. Further confusion would result from the fact that the President’s responsibility in these matters would simply not be clear.
It’s important not to be naive: no matter who occupies the White House, the Fed already cares what the president and Congress think, because its future independence is never guaranteed. However, explicit consultation would undermine the consistency of decision-making within the Fed itself and send a negative signal to investors. There is no advantage to this approach.
There’s a lot more at the link.
