....an audacious plan from Trump's quarters to usurp Fed power to determine the course of interest rates
....does Trump care if inflation soars from cutting rates? Higher cost of living impacts the poor and the middle class more than the wealthy (whom he belongs). Higher asset prices from inflation benefits the rich.
...ironically his supporters would be the ones impacted most by Trump's policies e.g imposing tariffs on foreign goods which increases domestic prices, cutting rates without due care on inflation exacerbating cost of living issues.
...a super bubble awaits his Presidency that would likely lead to an implosion of MOAB (mother of all bubbles). Trump to set interest rates himself under secret presidential plan Tim Wallace
Apr 27, 2024 – 1.28pm
Donald Trump’s aides have drawn up secret plans to oust the chairman of the Federal Reserve and allow the president to set interest rates, according to reports.
Allies are said to have drawn up a range of proposals for the way monetary policy could be run in a second Trump administration, including rolling back the independence of the central bank, which has been critical to the functioning of the economy and financial system in recent decades.
Supporters of the Republican candidate have compiled a 10-page document with a new vision for the running of the central bank and monetary policy, according to the Wall Street Journal.
It includes the authority to eject Jerome Powell from his position as chairman of the rate-setting Federal Open Market Committee.
Mr Trump appointed Mr Powell to the position in his first term as president, having declined to give the incumbent, Janet Yellen, a second term at the Federal Reserve.
Ms Yellen is now Treasury secretary for Joe Biden, the president.
The document also suggests Mr Trump could be consulted on interest rate decisions by the Federal Reserve chair, who would then negotiate the final decision on borrowing costs with other policymakers on his behalf.
Less sweeping changes to the central bank could include exposing its regulations to more regular reviews by the White House, the WSJ reported.
As president, Mr Trump regularly called for lower interest rates to boost the economy and expressed dissatisfaction with Mr Powell’s decisions. In 2019, he said Fed officials had “no guts, no sense, no vision”.
Moves to limit the independence of the Fed would likely prove controversial. The independence of central banks has become a central pillar of the modern financial system.
Michael Pearce at Oxford Economics said: “Any serious attempt to undermine the Fed would have a high risk of having the opposite effect. There are many examples from history where political pressure for lower rates has had the opposite effect and pushed the Fed to lean towards tighter policy than otherwise.”
Even if interest rates did come down, financial markets would recognise the risk of higher inflation and charge the US government a higher borrowing cost to compensate. This would offset any anticipated boost to the economy.
The temptation for the president to lower interest rates under the proposed system could also prolong the inflation crisis in the US.
James Knightley, economist at ING, said: “If Trump lets inflation rip it is likely to be his own supporters that will be most hurt. Trump may want lower interest rates, but if inflation becomes entrenched, that could be the bigger threat to the success of his presidency.”
Strong consumer spending and stubborn inflation has raised expectations that the Fed will have to keep interest rates higher for longer in its battle to keep a lid on price rises.
Charles Hepworth at GAM Investments said this rate of price rises would force Mr Powell to keep rates on hold.
He said: “This is a level that hardly augers in early rate cuts.”
Interest rates, which stand at 5.5 per cent in the US, are set to play a key role in this year’s election. Traders in financial markets have priced in just one cut for this year, most likely to come in November.
If that forecast holds true, the timing of the election means Americans will not benefit from lower borrowing costs by the time they go to the polls.
