A second Donald Trump presidency could drastically reshape how the Federal Reserve operates, potentially eroding its decades of political independence.

According to an explosive report by The Wall Street Journal, Trump’s political allies are quietly drafting policy proposals that would reimagine how the Fed sets interest rates.

Citing sources familiar with the matter, the Journal said Trump’s allies have drafted a 10-page document that includes various recommendations, from small policy changes to the president himself playing a leading role in setting interest rates.

One recommendation is that the president should regularly be consulted on rate decisions. Another would require the Fed’s deliberations and policy decisions to be reviewed by the White House before they’re made public.

The draft document also recommends giving Trump full authority to fire Fed Chair Jerome Powell before his four-year term expires in 2026.

Different recommendations, but all tell the same story: The Fed must consult the president before crafting policy.

Although the Journal couldn’t independently confirm whether Trump had endorsed the policy effort, the newspaper’s sources said he was well aware of the proposal. Given Trump’s history with the Fed, that’s not hard to believe.

Trump and the Fed: A tumultuous relationship

As president, Donald Trump regularly clashed with the Fed, accusing the central bank of undermining his administration by keeping interest rates elevated or not cutting them fast enough.

Even during the height of the U.S.-China trade war in 2019, Trump took to social media to explain the real problem: “China is not our problem, the Federal Reserve is!” he said on X (formerly Twitter).

A week before that infamous tweet, Trump accused the Fed of being “derelict in its duties if it doesn’t lower the Rate and even, ideally, stimulate.”

As the social media posts clearly show, Trump was pressuring the Fed to cut rates to zero or even negative territory. The idea was that low interest rates would encourage consumers and businesses to spend money, potentially boosting the economy during Trump’s presidency.

Although Trump wasn’t the first president to pressure the Fed, Politico reports that his public clashes with the central bank were “unprecedented.” His rhetoric was also a clear break from the approach of the last three presidents.

“From the Clinton administration in 1993 through the Obama administration, there’s been the norm that presidents won’t put pressure on the Fed,” said Kathleen Day, a lecturer at Johns Hopkins Carey School of Business.

During the thick of it all in 2019, Jaret Seiberg of the Cowen Washington Research Group said Trump will “blame the Federal Reserve for any negative economic news while taking credit himself for positive news.”

The difference is that, as president, Trump was willing “to go much further than his predecessors in that criticism. This includes frequently floating the idea that he could fire” Jerome Powell, Seiberg explained.

If Trump wins re-election, Powell’s days as Fed chair are probably numbered, whether through firing or not being reappointed for a third term.

Powell likely gone if Trump retakes White House

Trump didn’t mince words when asked about Powell’s future with the Fed if he were re-elected president.

In a February interview with Fox News, Trump said Powell’s policy decisions were “political” and that “he’s going to do something to probably help the Democrats, I think, if he lowers interest rates.”

As such, Trump plans to appoint a new Fed chair if he wins re-election. While he may not be able to fire Powell without a court challenge, he could wait for the Fed chair’s second term to expire before appointing someone new.

According to Trump, the Fed has failed to tame inflation under Chairman Powell. “He’s not going to be able to do anything” about inflation, Trump said. “But it looks to me like he’s trying to lower interest rates for the sake of maybe getting people elected.”

As recently as last month, Powell was eyeing three interest rate cuts this year, but that was before an alarming resurgence of inflation.

According to the Bureau of Economic Analysis, the core PCE index—the Fed’s preferred measure of inflation—nearly doubled in the first quarter, climbing from 2% to 3.7%. At the same time, GDP growth was cut in half compared to the fourth quarter.

The report was the “worst possible outcome for the Fed,” according to The Kobeissi Letter, a global capital markets commentary.

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