Trump against the Federal Reserve: Why is the president not able to impose interest rates on the decline?

With American families thwarted with years of High borrowing costsPresident Donald Trump has installed his position with a bold pledge Low interest rates. Last week, it is Take pits in the federal reserveHe said, “I will ask for interest rates immediately.”

However, there is almost no chance to reduce interest rates at the Federal Reserve prices on Wednesday. It may not for several months.

The central bank in the country began to reduce the standard interest rate last year, as inflation seemed steadily eager. But there is a lot of uncertainty and less urgent, especially with the apparent increased inflationary pressures and the flexible labor market, until the Federal Reserve Bank will reduce a fourth consecutive at this week’s meeting.

While Trump will be able to appoint a new Federal Reserve Chair in 2026, it does not have the ability to set monetary policy or change the rate of federal funds. There is no president who has the direct ability to limit Mortgage ratesAPRS credit card or business loan prices.

In fact, economic data plays the starring role here. If inflation becomes under control (it operates perfectly 2 % annually) or the labor market becomes much weaker, the Federal Reserve will have an authorization to reduce interest rates. Given that things look now, most economists do not expect to reduce the interest rate until May or June as soon as possible.

Here are the details of what Trump can and cannot do on interest rates and federal reserve chat.

Who already set interest rates?

The Federal Reserve sets the price of federal funds, which banks pay to borrow money overnight. This standard interest rate affects the prices imposed by banks and lenders clients on everything from credit cards to home loans and cars.

The Federal Reserve reduces and increases interest rates to stabilize prices and maintain low unemployment, according to Peter C Aire, Senior economists at the American Institute for Economic Research.

To understand how this works in practice, think about the first days of Covid-19 epidemic. When the economy was taking place in 2020, The federal reserve has decreased interest rates to scratchHoping to encourage spending and investing at a time when people and companies will be reluctant. Then, when the economy bounced two years later, Federal reserve raised interest rates to tame rapid inflation.

What is the relationship that the Federal Reserve with Congress has?

Federal Reserve It was created by Congress in 1913. Congress can amend the Federal Reserve Law to change the way the Federal Reserve works, but the president cannot. The basic authority of the president is to appoint the Chairman of the Federal Reserve and other members of the Board of Directors.

Presidents often appoint members of the Federal Reserve Council who are in line with their views in the world. “The appointments are intertwined so that no president has the authority to completely reshape the federal reserve.”

In theory, Trump can pay for changes in the Federal Reserve Law through Republican -controlled Congress. However, Bender said that any amendments to the rules governing the Federal Reserve will need a two -party alliance of 60 votes to pass the Senate.

---

What the president can do	What the president cannot do
The appointment of a new Federal Reserve Chairman in 2026 (and the appointment of members of the Board of Directors of the Federal Reserve in general when their terms of conditions end)	Federal Reserve’s Chair was shot with minor disputes. Federal reserve chairs can only be removed “for the cause”, such as misconduct or violations.
Voice attention to monetary policy by criticizing the actions of the federal reserve.	Setting direct interest rates for the country or banking institutions.

---

Does Trump have federal reserve power?

In 2018, during his first administration, Trump has been appointed Current Federal Reserve Chairman Jerome Powell. Two years later, Trump described him as “the enemy“When he was asked in November whether the president was able to shoot or reduce the Fed Bank of Reserve or other federal reserve rulers, Powell replied,” It is not permitted under the law. ”

The president cannot remove Powell before the end of his term in 2026 simply due to political differences or frustration over interest rate decisions. According to Earle, members of the Federal Reserve can be removed only “for the cause”, that is, misconduct or its inability to do the mission due to illness.

At the same time, the presidents have unofficial power on the federal reserve through the pulpit of Fatwa. Some presidents are known to flow against the federal reserve when the economy is bad, which presses them to take action. Trump did this in March 2020 by threatening to remove the Federal Reserve Chair when the economy almost collapsed, and this pressure is likely to be applied again during his second term.

Is the Federal Reserve Politically independent?

In theory, the federal reserve is independent. But in practice, it is almost impossible for an entity very important, such as the federal reserve is completely above politics, according to Earl.

The Federal Reserve contains many structures that isolate it from external influence: long terms for members of the Board of Directors, timelines for overlapping dates and removal expectations for the cause, for example. All of these work to allow the Federal Reserve some autonomy and protect it from the whims of political leaders. But in the end, the Federal Reserve works in the middle of the political system.

“He cannot be badly sealed,” said Bander.

How will Trump’s policies affect interest rate discounts?

Experts say that Trump’s broader economic policies will reduce interest rates faster or deeper. In fact, most economists expect to have the opposite effect.

Trump’s suggestions on foreign imports are likely to cause definitions Dean BakerSenior economists in the Center for Economic Policy and Research.

Trump’s greatest impact on prices may be the absolute uncertainty that inspires him, which can fade financial markets. His free statements and executive orders of investors, who are not sure exactly of the direction that he may take or what a legal reaction will receive.

Trump’s demands to control the Federal Reserve, regardless of whether he can continue, only add more instability to this mix.

Related articles on the Federal Reserve Bank