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  • Writer's pictureRealFacts Editorial Team

Economists Sound Alarms as Trump Wants to Reduce the Fed’s Independence


Donald J. Trump

Some of Trump’s “allies” have hinted that if the former President wins this year’s election, he may institute policies that will force the Federal Reserve to involve the oval office prior to making major moves. This would drastically reduce the independence that the Fed currently maintains. Below are several quotes, compiled by Victor Reklaitis of MarketWatch, from Wall Street economists regarding these potential policies:


  • “The policies that Arthur Burns, chair of the Fed during the Nixon administration, followed to ‘consult’ with the president were a disaster — leading to prolonged period of inflation. I hope today’s WSJ article on the Fed [is] not serious. … Countries that have experimented with political ‘consultation’ on monetary policy have experienced prolonged periods of inflation. The most recent example is Turkey, whose inflation rate is currently 68 percent — the result of politics driving Turkey’s monetary policy decisions.” — Eric Rosengren, former Boston Fed president

  • “This is the bad idea of all bad ideas. Take a look at the central bank of Turkey & then explain to all of us how this would work out.” — Joe Brusuelas, chief economist at consulting firm RSM US

  • “This WSJ article about Trump limiting the Fed’s authority is very alarmist. Basically, some people said some stuff and that stuff may not be legal or even official policy. … People talk about the Federal Reserve’s independence as if it were a sacred constitutional principle. It’s not. The Fed is not a separate branch of government . It was made by Congress and it should do the people’s bidding. For most of our history, we never had the Fed.” — Eddy Elfenbein, fund manager

  • “This is one example of why it will matter whether Trump will still have sane financial market/business people around him in a second term. But we are very skeptical that the Fed would lose independence under Trump. We believe Powell would – likely successfully – sue in courts to contest any effort to dismiss him before his term is over and note that the next Fed chair will need to be Senate confirmed. More practically, the market would react very badly to any effort to tame the Fed, and we think this would cause the administration to back off and focus on its policy priorities.” — Evercore ISI analysts

  • “Horrifying. 3rd world, populist garbage.” — James Pethokoukis, senior fellow and DeWitt Wallace chair at the American Enterprise Institute


It's safe to say that many analysts are not looking at these alleged changes too fondly. Some say that it's not very probable that these changes will take effect even if Trump is elected, but the possibility seems to be annoying several economists.


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