Trump plans to set rates himself in Fed overhaul

DONALD TRUMP’S aides have drawn up secret plans for the president to set interest rates himself and oust the head of the Federal Reserve, 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 Fed. Ms Yellen is now treasury secretary for President Joe Biden.

The document also suggests Mr Trump could be consulted on interest rates by the Fed chair, who would then negotiate the final decision on borrowing costs with other policymakers.

Less sweeping changes to the central bank could include exposing its regulations to more regular reviews by the White House, the newspaper 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 is a central pillar of the financial system.

James Knightley, economist at ING, said: “Trump may want lower interest rates, but if inflation becomes entrenched, that could be the bigger threat to the success of his presidency.”