Minho Kim (The New York Times)
JD Vance, the Republican vice-presidential candidate, said that he “absolutely” agreed with former President Donald Trump’s recent suggestions that presidents should have a say in determining the Federal Reserve’s benchmark interest rate, signaling his support for political influence over the central bank.
“It would be a huge change,” Vance said on CNN’s “State of the Union.” “The political leadership in this country should have more say over the monetary policy.” He added that determining interest rates “should fundamentally be a political decision.”
Economists broadly agree that the central bank should be independent from political pressure to control inflation and preserve the value of a nation’s currency, and the president does not currently have direct influence over its decisions but does appoint its chair and the six other members of its Board of Governors.
During recent campaign rallies, however, Trump has promised to cut interest rates if elected, and The Wall Street Journal reported in April that Trump’s allies were seeking ways to undermine the independence of the Fed, which includes firing the chair, Jerome Powell.
“President Trump is saying something that’s really important and actually profound,” Vance said on CNN. “You have so many bureaucrats making so many important decisions. If the American people don’t like our interest rate policy, they should elect somebody different to change that policy. Nothing should be above democratic debate in this country.”
It is unclear whether the president can fire a sitting Federal Reserve chair. Trump has said he would allow Powell to serve out his term.
During his presidency, Trump pressured Powell to lower interests rates and attacked the chair and the board members for keeping rates higher than he wished.
Despite Trump’s suggestions, some of his previous administration officials seem to disagree.
“Thank goodness we have an independent Fed,” Jay Clayton, chair of the Securities and Exchange Commission during the Trump administration, said last week Although Trump wants lower rates, he has said the Fed should not lower them before the election, implying a lower rate that can stimulate economic growth would be a political boon to incumbent Democrats.
Fed officials have held interest rates at 5.3% - the highest level in about two decades - in an effort to snuff out painfully high inflation in 2022 and 2023 amid the coronavirus pandemic and Russia’s invasion of Ukraine. After a significant slowdown in inflation, Powell has signaled that rate cuts are approaching and could start in September.
Economists broadly agree that the central bank should be independent from political pressure to control inflation and preserve the value of a nation’s currency.
During recent campaign rallies, however, Trump has promised to cut interest rates if elected, and The Wall Street Journal reported in April that Trump’s allies were seeking ways to undermine the independence of the Fed