Do Not Sleepwalk Through Trump’s Attack on the Fed’s Independence

#Do Not Allow Trump's Attack on the Fed's Independence to Pass You By The independence of the Federal Reserve has long been a cornerstone of U.S. economic stability, shielding monetary policy from the short-term political whims of any administration. Yet, as Donald Trump campaigns for a second term, his renewed attacks on the Fed—and his stated intention to exert greater control over it—should ring alarm bells for anyone concerned about the health of American democracy and the economy.

### **Why Fed Independence Matters**

Independence of the central bank is a crucial safeguard against inflation, financial instability, and interest rate manipulation motivated by political considerations, not some abstract bureaucratic principle. Without fear of retaliation from the White House, the Fed can make difficult but necessary decisions like raising rates to reduce inflation or lowering them to boost growth when it operates without political pressure. History has shown the dangers of politicizing monetary policy. In the 1970s, Arthur Burns, then-Fed chair, faced intense pressure from President Nixon to keep rates low ahead of the 1972 election. The outcome? Runaway inflation that took years to tame. More recently, Trump himself repeatedly berated then-Chair Jerome Powell for not cutting rates fast enough, even suggesting he had the authority to fire Powell—a legally dubious claim.

### Trump's Threat Against the Fed Trump has made no secret of his desire to bend the Fed to his will. In a recent interview, he suggested he might replace Powell (whose term expires in 2026) with a more compliant chair and hinted at direct intervention in interest rate decisions. “I would be involved,” he said, signaling a willingness to erode the traditional firewall between the White House and monetary policy.

This is part of a broader pattern of Trump’s authoritarian impulses—centralizing power, attacking independent institutions (from the judiciary to the Justice Department), and demanding personal loyalty from officials who are meant to serve the public, not a president. If he succeeds in politicizing the Fed, the consequences could be dire:

1. **Instability in the Market**: Investors depend on the Fed's predictability. Volatility caused by political interference could undermine confidence in the Treasury market and the US dollar. 2. **Higher Inflation** – If the Fed is pressured to keep rates artificially low for political gain (e.g., juicing the economy before an election), it could lead to overheating and long-term inflation.

3. **Erosion of Democratic Norms** – A Fed beholden to the president would mark another step toward the kind of strongman governance that weakens checks and balances.

### **A Warning for 2025 and Beyond**

The Fed is far from perfect—it has made mistakes in timing rate hikes or misjudging inflation. But its flaws do not justify turning it into a political tool. Congress, the media, and voters must push back against any attempt to undermine its independence.

If Trump returns to the White House and succeeds in bending the Fed to his will, the damage could extend far beyond his term. The lesson from democracies that have fallen into autocracy is that institutions often erode slowly—until one day, they collapse altogether. We must not sleepwalk into that danger.

The central bank's independence protects against inflation, financial instability, and political manipulation of interest rates. It can make necessary decisions without fear of retaliation from the White House. However, politicizing monetary policy has led to runaway inflation and legal disputes, as seen with former Fed chair Arthur Burns.

Trump's potential manipulation of the Fed could cause significant damage beyond his tenure, highlighting the danger of institutions deteriorating slowly, leading to eventual collapse

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