Trump and the Fed's Independence Test
US President Donald Trump and his allies are renewing their push to reshape the Federal Reserve. This move comes after the US Supreme Court temporarily blocked the removal of Fed Governor Lisa Cook, allowing her to remain in office while fighting legal proceedings against her.
Several senior Trump officials and allies are reportedly exploring ways to remove several members of the Fed's Board of Governors. The goal is to free up space for Trump to install more of his chosen people at the central bank. Lisa Cook remains a prime target, while former Fed Chairman Jerome Powell also remains in the spotlight.
While the Supreme Court ruling strengthens the Fed's independence from executive pressure, some observers believe the decision is procedurally narrow. Trump's allies see the ruling as a clue to a more appropriate way to re-push Cook's removal. Trump himself has said his administration will begin a new process with more rigorous procedures.
Pressure on the Fed is mounting as Trump continues to push for lower interest rates. He has previously criticized Powell for not cutting rates quickly enough. However, the likelihood of a rate cut this year is diminishing as inflationary pressures resurface. In the June projections, about half of Fed officials even assessed that interest rates might need to be raised again.
Powell also remains a concern because he will remain as a Fed governor after his term as chairman ends. Trump is reportedly unhappy with Powell's decision to remain on the board of governors until his term ends in 2028. Powell himself believes it is important to maintain the independence of monetary policy from political pressure.
In addition to Cook and Powell, the White House is also beginning to examine the vacant position of president of the Atlanta Fed. This position is considered strategic because the regional bank plays a crucial role in analyzing US economic growth. Treasury Secretary Scott Bessent is reportedly seeking potential candidates who align with Trump's economic policy direction.
Trump's efforts to influence the Fed could trigger new concerns in the market. If the central bank's independence is perceived as weakening, investors could become concerned about the direction of US monetary policy, the stability of the dollar, and the outlook for inflation. Such conditions have previously boosted demand for gold as the market seeks a hedge against rising political and economic risks. (arl)
Source: Newsmaker.id
