Trump’s efforts to control the Federal Reserve put the U.S. economy in jeopardy | Editorial
Trump’s pressure campaign against the Fed’s independence and its chairman, Jerome Powell, has broader repercussions on America’s financial system.
Donald Trump was elected twice on a slogan to make America great, but nearly everything he does makes the country worse.
Trump’s Big Beautiful Bill increased U.S. debt and boosted healthcare costs. His tariffs have raised prices, while cuts to regulations have left workplaces more dangerous. Trump has also weakened higher education, slashed lifesaving medical research, damaged relationships with allies, and undermined the rule of law.
In short, many of Trump’s policies are making people sicker, poorer, and less safe. In that context comes Trump’s latest attack on the Federal Reserve, which will ultimately hurt all Americans.
Since returning to office last year, Trump has pressured Federal Reserve Chairman Jerome Powell to speed up interest rate cuts in an effort to boost the economy. But the Fed has moved cautiously to avoid further inflation.
Trump’s economic approach has been reckless and shortsighted.
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In July, he threatened to fire Powell. Last month, Trump said he may sue Powell for “gross incompetence.”
On Friday, the U.S. Department of Justice opened a criminal investigation into Powell involving his testimony before the Senate Banking Committee regarding the increased costs of renovations to the Fed’s headquarters in Washington.
Trump claimed not to know anything about the investigation, but he had previously criticized the renovation costs. Let’s be clear: Trump’s long-running attacks on the Fed chair are the only reason Powell faces any legal trouble.
The Powell investigation shows yet again how Trump continues to pervert the once-independent Justice Department, using it as a political tool to go after his perceived enemies.
Attorney General Pam Bondi continues to do Trump’s bidding. She has launched bogus investigations into other public officials, including former FBI Director James Comey and New York Attorney General Letitia James.
Add Powell to the political hit list that is making a mockery of American justice.
In a rare sign of political courage, some Republican lawmakers mustered the nerve to criticize Trump’s attack on Powell.
Sen. Lisa Murkowski (R., Alaska) said that “the administration’s investigation is nothing more than an attempt at coercion.”
Sen. Thom Tillis (R., N.C.) said the “independence and credibility” of the Department of Justice “are in question.” He promised to oppose the nomination of a new Fed chair until the legal issues are resolved.
But until more Republicans stand up to the president, expect more abuses of power.
Trump’s attack is especially petty, since Powell’s term as Fed chair ends in May, though he can remain on the board through January 2028.
Trump actually nominated Powell to be chairman during his first term in the White House. In a sign of Powell’s independence, former President Joe Biden renominated him to a second term.
By most accounts, Powell has done an impressive job steering monetary policy through uncharted territory involving the pandemic, followed by inflation brought on by increased government spending.
Trump’s pressure campaign on Powell has broader repercussions on America’s financial system.
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The Fed’s independence is a cornerstone of U.S. financial markets, as it instills trust in investors, business leaders, economists, and other governments around the world that U.S. monetary policy is set without regard to political pressure.
Without that firewall, presidents could push for rate cuts to boost the economy before an election, potentially causing higher inflation and instability down the road just for short-term political gains.
In this instance, Trump clearly has his eye on revving up the economy before the midterms. (Trump would likely blame any subsequent inflation on Biden.)
Politicizing the Fed creates instability and will harm investors and consumers in the long run. Reports of the Powell investigation already rattled financial markets, prompting investors to sell American stocks and bonds.
To his credit, Powell has remained steadfast and made clear that the stakes surrounding the investigation are much bigger. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”
But the damage to the Fed is already done, as Trump continues to place his political and financial interests ahead of those of the American people.