What will happen to the Fed Chairman if Trump wins the election? | Economy

Former US President and current Republican candidate Donald Trump warned US Federal Reserve Chairman Jerome Powell against cutting US interest rates before the presidential election in November, but said that if elected he would allow him to serve out his term if he “does the right thing”.

Trump acknowledged in an interview with Bloomberg News that the US central bank “maybe” will cut interest rates before the November 5 election, but added, “It’s something they know they shouldn’t do.”

Politicization concerns

Trump also addressed growing concerns in financial markets that he might politicize the Fed, starting with trying to force Powell to step down before the end of his term as central bank chairman in 2026, saying, “I would let him work, especially if I thought he was doing the right thing.”

The interview with Bloomberg was conducted in late June, but was released during a Republican Party conference on Tuesday.

Investors fear that the former president will seek to remove Powell, who is widely seen on Wall Street as a successful chairman, leading the Fed through one of the worst inflation shocks in decades, the Financial Times reported.

But Trump’s warning that he wants to see Powell do the “right thing” may leave some questions about the Republican nominee’s pledge not to push for his early replacement, the British newspaper reported.

More confidence

On Monday, Powell said the central bank was gaining more confidence that inflation was falling back to its 2% target, raising expectations that the Fed will make its first rate cut since 2020 at its September meeting, just six weeks before the election.

Trump has relentlessly attacked President Joe Biden on the economy, blaming his Democratic rival for soaring inflation as the Covid-19 pandemic chokes global supply chains and soaring energy costs after the war in Ukraine.

Although Powell took over as Fed chairman in 2018, Trump has repeatedly attacked him during his presidency for not cutting interest rates amid his trade wars, and once wondered whether the Fed chairman was a bigger enemy of the United States than Chinese President Xi Jinping.

Trump’s push to replace Powell before the end of the president’s term would likely face a legal challenge, set up a showdown with the central bank and risk significant market volatility.

The Federal Reserve is debating when to cut its benchmark interest rate from a 23-year high of 5.25% to 5.5%, where it has been since July.

With price pressures easing and the labor market slowing, officials have indicated that lower borrowing costs will soon be justified.

The Fed’s political independence has long been seen as essential to its ability to manage the U.S. economy, and Powell has stressed that its decisions are based solely on the health of the economy.

“Our commitment is to make decisions when and where they need to be made, based on incoming data, evolving expectations and a balance of risks, and not taking into account other factors, including politics,” he told congressional leaders earlier this month.