Trump is once again pressuring the Fed, seeking to influence interest-rate policy
Kyiv • UNN
U.S. President Donald Trump has resumed pressure on the Fed, demanding lower interest rates and attempting to remove Federal Reserve Board Governor Lisa Cook. He is also calling the Fed’s new chair, Kevin Warsh, prompting debate about the central bank’s independence.
U.S. President Donald Trump has renewed pressure on the Federal Reserve, demanding lower interest rates and seeking to remove Fed Governor Lisa Cook. Bloomberg reports, according to UNN.
Details
Trump also periodically calls new Fed Chair Kevin Warsh and continues to publicly insist on lower rates. At the same time, the president’s attempts to influence the central bank have again sparked a debate over the limits of presidential powers and the Fed’s independence.
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At the beginning of August, Trump said he might fire Cook over allegations of mortgage fraud. The allegation concerns the purported false designation of a secondary home as a primary residence to obtain more favorable loan terms. Cook denies the allegations, and no criminal charges have been brought against her.
How the president can influence the Fed
The Federal Reserve Act provides that members of the Board of Governors may be removed from office by the president for cause. Courts have traditionally interpreted such grounds as inefficiency, neglect of duty, or malfeasance in office.
In Cook’s case, the issue remains disputed because the alleged violations cited by the Trump administration concern a period before her appointment to the Fed and are not directly related to her work. The U.S. Supreme Court previously allowed Cook to remain in office during the legal battle over the attempt to remove her.
The clearest lever the president has over the Fed remains the ability to appoint members of the Board of Governors to vacant positions, as well as to select candidates from among them for leadership posts, including chair of the central bank.
Presidential pressure on the Fed is not new. U.S. presidents from both parties have attempted to influence central bank decisions at various times. Lyndon Johnson personally criticized Fed Chair William McChesney Martin over higher borrowing costs, while Richard Nixon pressured Fed Chair Arthur Burns in the 1970s.
At the same time, central bank independence is considered important for the economy because it allows the Fed to make decisions without regard to political consequences. Studies show that autonomous central banks achieve better results in containing inflation. Lower interest rates are also politically attractive because they make borrowing cheaper and can stimulate economic growth.