Federal Reserve: Trump pressure and rate risks – Commerzbank

Commerzbank's Dr. Marco Wagner analyzes how Donald Trump’s past and potential future attacks on the Federal Reserve (Fed) affect its independence. Using the Central Bank Pressure Index, he notes that Trump’s criticism subsided after Kevin Warsh became Chair but warns that renewed inflationary pressures and possible rate hikes could quickly trigger fresh political interference and verbal assaults on the Fed.

Trump, Warsh and Fed independence risks

"The Federal Reserve has experienced two major verbal storms in the past, both of which occurred during President Donald Trump’s terms in office (2017 to 2021; 2025 to present). He first clearly expressed his displeasure with the Federal Reserve and Chair Jerome Powell in 2019 and 2020."

"Right at the start of his new term in early 2025, Trump again called on the Fed to lower interest rates more quickly and adopted a harsher tone with personal attacks. He discredited the chairman as “too late” Powell and urged him and Lisa Cook to resign."

"Even the appointment of Kevin Warsh is unlikely to change that. After all, Trump had nominated Jerome Powell as Fed chair eight years earlier, believing that Powell would consistently implement monetary policy according to his vision. When Powell failed to do so, he quickly became a target."

"With the change at the helm of the Fed—from Powell to Kevin Warsh—the U.S. president’s attacks on the Fed have come to a (temporary) end. Furthermore, Trump’s attention is likely to be focused more on the war with Iran."

"That could change quickly, however. Should inflationary pressures in the U.S. put the Federal Reserve in the awkward position of having to raise interest rates—after all, three of the twelve FOMC members recently voted in favor of such a move—Trump could once again take aim at the Fed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)