Federal Reserve Independence: This “nuclear” scenario, which indicates that things are really running out of bars.

The consequences can affect most of the Americans’ daily life: economists worry that if Trump gets what he wants-a loyal mobile bank that sharply reduces the short-term interest rates-it is possible that the result is higher than inflation, and over time, the high borrowing costs of things such as real estate loans, car loans and business loans.

Trump on Monday to request To shoot Lisa Cookthe The first black woman He was appointed to the Seven Federal Reserve Board of Directors. This was the first time in the history of the 112 -year -old federal reserve, as the president tried to shoot a ruler.

Trump said he was doing this because of the allegations raised by one of the appointed, that she had committed fraud on the mortgage.

Cook he has Argue She seeks to prevent her from shooting her that claims are an excuse for Trump’s real goal: obtaining more control over the Federal Reserve. The court may decide next week if it is Prevent Cook temporarily While the case makes its way through the legal process.

Cook was accused of asking two houses as a major housing in July 2021, before joining the council, which may lead to a decrease in the mortgage rate than if one of them was classified as a second house or an investment property. She suggested that she may be a written mistake, but she did not respond directly to the accusations.

Independence feeds “hanging with a thread”

Trump and members of his administration did not hide their desire to exercise more control of the Federal Reserve. Trump has repeatedly demanded that the central bank reduce its main rate to 1.3 %, from its current level of 4.3 %.

Before trying to cook, Trump Overpowered The Federal Reserve Chair, Jerome Powell, for not cutting the interest rate in the short term and threatened to launch it as well.

“We will have a majority very close, so it will be good,” Trump said on Tuesday.

“The case of Cook’s private governor is not as important as this last step about escalation in the attacks on the Federal Reserve,” said John Faust, the economist of Jones Hopkins and the former adviser to Powell. “In my view, the Fed Independence is now hanging with a thread.”

Some economists believe that the Federal Reserve should reduce more quickly, although no one agrees with Trump that he should do it by 3 percentage points. P. It has indicated The Federal Reserve is likely to reduce a quarter point in September.

Why do economists prefer independent central banks

The Federal Reserve has broad power over the American economy. By cutting the interest rate in the short term, it controls-which is usually done When the economy stumbles – The Federal Reserve can make cheaper in borrowing and encourage more spending, growth and employment. When raising the high price control rate that comes with inflation, it can weaken the economy and cause job losses.

Most economists have been preferred for a long time, independent central banks because they can take unpopular steps that are more likely to avoid elected officials. Economic research has shown that countries with independent central banks usually have less enlargement over time.

However, elected officials like Trump have much larger incentives to pay for low interest rates, making it easier for Americans to buy homes and cars and will enhance the short -term economy.

The Federal Federal Reserve may increase inflation

Douglas Elindorf, an economist at Harvard University and former director of the non -partisan Congress budget office, said Trump’s request to the Federal Reserve to reduce its main rate by 3 percentage points would excessive stimulation of the economy, and raise the demand of consumers over what the economy could result in and enhance inflation – similar to what happened during epidemics.

“If the federal reserve is under the control of the president, we will end up with higher inflation in this country, perhaps for years, to come.”

While the Federal Reserve controls a short -term rate, financial markets set the long -term borrowing costs of mortgage and other loans. If investors are concerned that inflation will remain high, they will demand higher returns on government bonds, which leads to an increase in borrowing costs throughout the economy.

In Türkiye, for example, President Recep Tayyip Erdogan forced the central bank to maintain low interest rates in early 2020, even with inflation to 85 %. In 2023, Erdogan allowed the central bank more independence, which helped reduce inflation, but short -term interest rates rose to 50 % to fight inflation, And still 46 %.

Other American presidents have led to a federal reserve. President Lindon Johnson was harassed by William McCsney Martin in the mid -sixties of the last century to keep the prices low as Johnson increased government spending on Vietnam War and Wool war programs. Richard Nixon was then pressed by Arthur Burns to avoid high interest rates in the period before the 1972 elections. Blame is blaming both rings on a large scale in leading to stubborn high inflation in the 1960s and 1970s.

Trump has also argued that the Federal Reserve must reduce its average to facilitate the federal government to finance the huge debt burden of $ 37 trillion. However, this threatens the attention of the federal reserve of the states of Congress of maintaining inflation and low unemployment.

Independence for accountability

The presidents have some influence on the federal reserve by their ability to appoint members of the Board of Directors, taking into account the approval of the Senate. But the Federal Reserve was created to be isolated from short -term political pressures. Federal reserve rulers are appointed at 14 years overlaid to ensure that no one president can appoint a lot.

Jane Maners, a law professor at the University of Fordham, said that there is a reason that Congress has decided to create independent agencies such as the Federal Reserve: They preferred “the decisions made of a kind of objective and neutral point that is based on experience rather than decisions that are entirely to political pressure.”

However, some Trump administration officials say they want more democratic accountability at the Federal Reserve.

In an interview with Usa Today, Vice President JD Vance said, “What people who say that the president does not have any authority here says effectively is that seven economists and lawyers should be able to make a decisive decision incredibly for the American people where there is no democratic input.”

Stephen Miran, an economic advisor at the top White House, wrote, paper Last year, the call for the restructuring of the Federal Reserve, including facilitating the president to shoot the conservatives.

“The general goal of this design is to provide economic benefits” to the independent central bank, Miran wrote, “while preserving the level of accountability that the democratic community must demand.” Trump It has been nominated Miran to the Federal Reserve to replace Adriana Cogler, which was unexpectedly stepped on August 1.

There can be more disturbances in the future

Trump personally insulted Powell for months, but his administration is now more focused on the wider Federal Reserve structure.

The Federal Reserve is making interest rate decisions through a committee consisting of the seven rulers, including Powell, as well as 12 heads of regional banks in cities such as New York, Kansas, and Atlanta. Five of these presidents vote on prices at each meeting. New York’s Federal Reserve Chairman has a permanent vote, while four others vote on a roundabout.

While the boards of reserve banks choose their presidents, the Federal Reserve in Washington can vote for their rejection. All 12 presidents will need to be re -appointed and accredited by the Board of Directors in February, which may become more controversial if the Board of Directors votes on one or more of the 12 presidents.

“The nuclear scenario is … the reinterment of the heads of reserve banks and the interference in that, (which will be) indicates that things really come out of bars,” said Adam Busn, President of the Peterson Institute for International Economy.