The Fed Under Trump 2.0

As president, Donald Trump tapped Jay Powell to run the Fed, a decision that he has sometimes questioned and threatened to reverse.Credit…Carlos Barria/Reuters

Trumponomics and the Fed

One of the hot debates on Wall Street this election cycle is how Donald Trump would deal with the Fed if he is re-elected and, in particular, if he would fire or demote Jay Powell as chairman, The Times’s Jeanna Smialek writes for DealBook.

In an interview with Bloomberg Businessweek conducted before last weekend’s assassination attempt, Trump said that he did not plan to fire Powell, allowing himto serve out his term. But he also added some drama by making the statement conditional, saying that he would keep Powell on “especially if I thought he was doing the right thing.”

That said, it’s not clear that Trump could legally fire Powell even if he wanted to, but Trump’s phrasing seemed to imply that he believed he had a choice.

Trump appointed Powell, but turned on him over interest rate policy. The former president was displeased when the central banker refused to cut rates to bolster economic growth. President Biden reappointed Powell to a new four-year term that started in 2022.

There have been questions about whether Trump would fire Powell. Rates are much higher now than when Trump was in office. Given his history of criticizing Powell’s policies, investors and economists have been wondering if Trump might actually try to fire the Fed chair if he were to win in November.

Trump still wants low rates, eventually. Asked to describe his philosophy for the economy, Trump talked about “low interest rates and taxes.” But there’s a hitch: The Fed sets rates independently of the White House. Some conservatives have suggested that Trump could try to wrestle Fed policy under White House control, but Trump did not talk about that in this interview. Instead, he spoke about bringing down inflation, which would in turn allow the Fed to cut borrowing costs.