Goodbye, Fed independence?

Investment Analysis Clubs Macro Economic Trends and Risks
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https://www.wsj.com/economy/central-banking/whoever-trump-picks-the-next-fed-chair-wont-be-independent-c8a79ead?mod=hp_lead_pos3

Whoever Trump Picks, the Next Fed Chair Won’t Be Independent

President’s social-media post shows worries about Hassett miss the point. Trump’s conditions compromise all the candidates.

By Greg Ip, The Wall Street Journal, Dec. 24, 2025

…

this Fed transition is unique in that the president wants a Fed chair who doesn’t fit traditional notions of “independent.” He wants someone to support his overall economic agenda, which means lowering interest rates, a lot.

Trump made this clear in a social-media post Tuesday. He lauded the strong third-quarter growth report, then lamented that markets often sell off on good news in anticipation of the Fed raising interest rates to avoid inflation…

“I want my new Fed Chairman to lower Interest Rates if the Market is doing well, not destroy the Market for no reason whatsoever. I want to have a Market the likes of which we haven’t had in many decades,” he wrote in his post. “Anybody that disagrees with me will never be the Fed Chairman!”

Simply put, the next Fed chair will only get the job having precommitted to lowering interest rates. That doesn’t fit most definitions of independence. All the finalists have said they favor lower rates: Hassett; former Fed governor Kevin Warsh, in close contention for the job; Chris Waller, a sitting Fed governor; and BlackRock executive Rick Rieder, considered a long shot… [end quote]

Notice the possessive “MY” new Fed Chairman. Trump is consistent in his insistence that everyone belongs to him.

The rest of the article is a detailed analysis of each of the candidates. It ends, “In fact, we only know of one central banker who could stand up to Trump, because he already has. It’s why Powell isn’t under consideration for another term.”

Trump clearly doesn’t understand that the fed funds rate is only a short-term rate. Or maybe he does and he intends to strong-arm the Fed into another round of QE. (They started again last week, supposedly a short-term fix to provide liquidity for banks.)

Wendy

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I’m sorry; is there some definition of ‘independent’ I’m not aware of? Throughout the military and government they are replacing anyone that might have a backbone or might be disagreeable!

JimA

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The only takeaway is after next Fed chair is appointed, they will have dovish policies. Fed independence is not dictated by only one person. In fact, Trump is sabotaging himself, because, rest of the members have to agree with the chair. With all these public comments he is not making anyone’s job easier.

If Fed independence seems compromised that is what USA deserves, because voting citizens, the party legislators, courts, all went along with this charade and didn’t put a stop to these kind of bullying. So they all agree Fed doesn’t deserve independence.

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Surely the president has an agenda, but that is not unique. Think back to Paul Volcker. President Carter had a definite agenda (bringing down inflation) and he choose the man to do it.

DB2

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I don’t think he has an agenda. I don’t think there is any long term thought but rather just a daily exercise in satisfying his wants and desires of the moment. There are plenty of agendas amongst his inner circle (like Stephen Miller). Figure out what they want and you will see the direction he is encouraged to move toward.

JimA

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That is very different from telling the person how to do the job and irrespective of the situation demanding rate cuts. President Carter’s agenda is the agenda of the American public. I am not convinced in the current situation.

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Clearly the President wants lower interest rates to stimulate the economy. I think that is one of his priorities. And as usual he is willing to push to the limits of the law to achieve his goal. When challenged his response “we’ll see you in court.”

He does have good legal advice on what the law might allow. He routinely challenges those limits and calls on courts to decide.

His approach to the fed iis no surprise. Will he succeed w new federal reserve members? And if he dictates lower rates before the fed is satisfied w the numbers, what will be the impact? More inflation? Will interest rates have to be increased?

Yes, worriers will worry as usual. Meanwhile we shall see what happens.

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This economy doesn’t require simulation. We are not at recession. The first post of this thread talks about how he is boasting about the GDP growth. So, saying he wants lower interest rate for the economy is bogus.

Republican presidents are actually very, very bad for economy. When a president talks about 10, 20% GDP growth, he is completely unhinged. That kind of growth brings economic ruin, not prosperity. My personal expectation is Trump is going to somehow manage to crash the economy. As usual democrats will come and clean up.

We have seen this movie too many times. The only question is how big and bad he is going to tank the economy.

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