Trump criticizes the Federal Reserve, hoping that the president will have some say on interest rates

Republican presidential candidate Donald Trump said on Thursday that the president should have some say on interest rates and monetary policy, marking his most explicit interest in encroaching on the Federal Reserve's independence to date, a move that would go against the central bank's long-standing practice of being independent of political actions.

"I think, for me, I've made a lot of money. I'm very successful," Trump said at a press conference held at his Mar-a-Lago Club in Palm Beach on Thursday. "I think, in many cases, my gut is better than the people at the Fed or the Fed Chairman."

Trump has often expressed frustration that the executive branch does not have more influence on interest rates. On Thursday, he criticized Fed Chairman Powell, saying that his rate adjustments were "either a little too early or a little too late."

Powell has pledged not to let political pressure influence the Fed's decisions. Since the late 1970s, presidents have traditionally refrained from publicly criticizing the Fed's interest rate decisions.

Powell and his colleagues have kept the benchmark interest rate at a high level for over 20 years since July 2023 to curb inflation. However, with a soft labor market, especially after the unemployment rate rose to 4.3% in July, some economists criticize officials for waiting too long to cut rates.

Fed policymakers are now widely expected to cut rates at the next meeting in mid-September, when some states have already started early voting. Trump has said that he believes the Fed should not cut rates close to the election. However, he has often stated in campaign speeches that if he wins a second term, he hopes for rate cuts.

Trump is inconsistent on the role he believes the executive branch should play in interest rates. Earlier this summer, in an interview with Bloomberg Businessweek, Trump said he would focus on lowering costs so that the Fed would subsequently cut rates. Last week at a rally in Pennsylvania, Trump conflated cutting borrowing costs with other policies more within the president's authority.

At a campaign event on July 31, Trump said, "We're going to cut regulations, lower energy prices, lower rates, we're going to lower prices, we're going to lower them very quickly."

According to The Wall Street Journal in April, Trump's allies have drafted a proposal to weaken the Fed's independence if he is elected. Trump's campaign team did not acknowledge the report at the time. However, his comments on Thursday indicate that he fully aligns with one of the main goals of the proposal: if he becomes president, his opinion should be sought on rate decisions, and the Fed's banking oversight proposals should be subject to White House review.

The next U.S. president—either Trump or Democratic candidate Kamala Harris—will have the opportunity to choose the next Fed chairman within the first two years of their term. One way to encroach on the Fed's independence is to nominate someone willing to comply with Trump's desire to control the Fed and secure their confirmation.

Economists fear that this could lead to policy mistakes similar to those seen in the early 1970s. At that time, Fed Chairman Arthur Burns, under pressure from his appointing President Nixon, maintained an expansionary monetary policy before the 1972 election, despite signs of mounting inflationary pressures By 1974, the inflation rate had already exceeded 12% and remained a stubborn problem for the next decade, until Federal Reserve Chairman Paul Volcker brought it under control through significant interest rate hikes, triggering two economic recessions in the early 1980s.

Current Federal Reserve Chairman Powell's term will expire in 2026, while his position on the Federal Reserve Board will expire in 2028