The Fed Chair: A Balancing Problem Between Independence and Political Pressure

Even if the US president does not fire Mr. Powell before his term ends in 10 months, Mr. Trump has made clear his desire that the next Fed chief must comply with his demands to lower interest rates.

On July 16, Mr. Trump declared that he only cares about those who support low interest rate policies.

Potential candidates under consideration by Mr. Trump include National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh, Fed Governor Christopher Waller, and Treasury Secretary Scott Bessent. These people have all expressed support for lowering interest rates.

Jon Hilsenrath, senior adviser at investment firm StoneX, said Trump is looking for someone he expects to cut interest rates aggressively, so whoever becomes the next Fed chairman will face an “implicit commitment” to deliver.

Recent media reports have suggested that Mr. Hassett is the front-runner. While Mr. Hassett has said that everyone in the White House understands the importance of Fed independence, he also agrees that interest rates should be lowered even further than they are now.

He said the Fed's failure to cut interest rates raised "legitimate concerns" that Fed members themselves were not respecting their independence.

Another candidate, Mr. Warsh, also emphasized that history shows that the Fed's independence in conducting monetary policy is necessary. However, he said the Fed's reluctance to cut interest rates is a "significant negative."

US history has recorded many cases of Presidents challenging Fed Chairmen, including the confrontation between President Lyndon Johnson and Fed Chairman Bill Martin in the 1960s, or President Richard Nixon pressuring Fed Chairman Arthur Burns to lower interest rates before the 1972 election.

Pressure on Mr. Powell has not stopped as the White House continues to raise the issue of the cost of the $2.5 billion Fed headquarters renovation project.

The head of the Office of Management and Budget (OMB), Mr. Russ Vought, said that the Fed has been mismanaged for many years and Mr. Powell's request for an internal investigation is "not enough." Mr. Vought wants a direct meeting with those in charge of the project, although he denied this was an excuse to fire Mr. Powell.

However, the move has faced bipartisan opposition. Republican Senator Thom Tillis warned that making the Fed a presidential agency would be a "big mistake." Senate Majority Leader John Thune also said the market wants an independent Fed, free from political influence.

Even Democratic Senator Elizabeth Warren, who has criticized Mr. Powell, warned that the market “would crash” if Mr. Trump fired the Fed Chairman./.

According to VNA

Source: https://baothanhhoa.vn/chiec-ghe-chu-cich-fed-bai-toan-can-bal-giua-tinh-independence-va-ap-luc-chinh-tri-255206.htm