Last August, it was released Trump The idea that he, as a successful businessman, should have “at least” an opinion on… Monetary policy For reserve Federal.
A new study from the Peterson Institute for International Economics, a well-known nonpartisan think tank, found that such an idea could have “disastrous economic consequences.”
The study’s lead researchers analyzed the economic impact of three of Trump’s campaign promises: mass deportations, tariffs, and undermining the independence of the Federal Reserve.
During a potential Trump presidency, the study found that undermining the Fed’s independence would… Economic losses It amounts to $304 billion.
While Trump did not specify exactly how he would influence the Fed, the researchers assumed that he would be successful and put pressure on the bank to increase economic growth when conducting their study. They found that such an action would lead to lower GDP and higher inflation until 2040.
According to Business Insider, one of the study’s authors, Eric McKibben, a senior fellow at the Peterson Institute, said:
- GDP and employment will rise initially, but inflation and input costs will rise rapidly after that.
- Eventually, capital will flow out of the United States, causing the value of the dollar to fall.
- McKibben commented, “It’s like a party in front and a headache four years later!”
High inflation
He added that by 2028, it will be Inflation Embedded in the economic system at an additional rate of 2 percent per year, the economy will be exposed to contraction, and domestic producers will bear the brunt of the consequences due to higher input costs. As the prices of domestic goods rise, the purchasing power of workers will decrease.
At the same time, researchers argue that investors will panic over the politicized Federal Reserve and begin directing their capital to other countries starting in 2026. The study found that production will shift to other parts of the world, including China.
Therefore, controlling the Fed would be counterproductive for Trump, even though he promises an American-first economic agenda.
According to the study, the economy will reach its lowest levels in 2028, and then begin to recover.
Vague plans
While Trump’s specific ideas on the Fed remain vague, some of his allies are quietly formulating plans on how to strip the central bank of its independence, the Wall Street Journal reported.
The newspaper pointed out that a 10-page statement includes policy shifts and suggests that the president should have a direct say on interest rates, and that this group of his allies believes that Trump should be able to remove Jerome Powell from the position of Chairman of the Federal Reserve Bank before his term ends in a year. 2026. It was reported that Trump did not publicly acknowledge these plans, and his advisers said that the campaign did not support them.
McKibben and his fellow researchers did not examine Vice President Kamala Harris’ policies in the same way because, according to the paper, she “did not propose any significant departures from the Biden administration’s policies and none had as large international economic impacts as Trump’s policies.”
And they saw that Harris She doesn’t think the public is paying enough attention to the risks of Trump’s Fed proposals or the general uncertainty surrounding the candidates’ economic policy, and neither Trump nor Harris have shared much about how their proposals will be implemented or their long-term economic impacts.
Trump and the Fed’s relationship
Head of Global Markets at Cedra Markets, Joe Yark, ruled out the possibility of Trump succeeding in controlling the US Federal Reserve. In his interview with the “Eqtisad Sky News Arabia” website, he stressed that the Federal Reserve is an independent body that manages the monetary policy of the United States, while the government focuses on the financial aspect.
Yarak added that if Trump arrives at… The white houseit would need to issue new legislation to re-enact it Laws Regarding the mission of the Federal Reserve, he warned that there were opponents in the Republican Party itself.
He pointed out that the relationship between Trump and the Fed is not good, as during his last presidency, Trump was dissatisfied with the Chairman of the Federal Reserve, Jerome Powell, even though he was the one who appointed him. Trump recently warned against cutting rates before the elections, while the Fed actually decided to cut them at its September meeting.
Yarak expressed his concern that Trump might take reckless steps if the US reserve came under his control, which could lead to economic crises and monetary instability in America. He also touched on Trump’s economic plans, which include stimulating corporate tax cuts, noting that this will require more debt, which means that America’s debt will continue to rise until it reaches $45 trillion before 2030.
Constant skirmishes
The Executive Director of VI Markets, Ahmed Moati, confirmed in exclusive statements to the “Eqtisad Sky News Arabia” website that the skirmishes between Trump and the Fed are not new, pointing out that Jerome PowellChairman of the Federal Reserve, always emphasizes that politics should not influence the central bank’s monetary policy. However, Trump is still trying to provoke him and play on his reputation by promoting the idea that the Fed cut interest rates by fifty basis points last September as a way to give a boost to Harris’ candidacy in the November elections.
Moati explained that Trump stated that he intends to control the Fed, but he ruled out this happening, explaining that undermining the Fed did not happen during the presidency of Powell, who has a strong personality. He also stated that the previous skirmishes did not lead to undermining the Fed, and it is unlikely that Trump will be able to do so, as the strength of the Fed lies in the independence of its decisions.
He expected that if Trump succeeded in controlling the Federal Reserve, the economic risks to which the American economy would be exposed would be great. He explained that in any country where political standards control the central bank, this sends negative messages to investors, especially in a country with a capitalist system such as the United States, which may lead to investor flight. He stressed that the strength of the American economy lies in the separation between monetary policy and politics.
electioneering
Financial markets expert, Hanan Ramses, said in exclusive statements to the “Eqtisad Sky News Arabia” website that Trump cannot interfere in the Fed’s policy or undermine it if he becomes president of the United States. She explained that the US Congress gives the Federal Reserve the freedom to choose its policies, which prevents the head of state from interfering in them, and therefore the Federal Reserve’s policies remain independent.
She pointed out that Trump’s statements about his interference in the Federal Reserve’s monetary policy reflect electoral propaganda aimed at attracting more voters’ votes, especially after he felt that he lost some votes to Kamala Harris, whose electoral chances have become better according to some polls.
She based her opinion on several points, including Harris’ campaign organization and her speech during the debates, in addition to presenting a program that focuses on tax breaks, economic cooperation, and trade recovery. On the other hand, Trump is talking about imposing protectionist duties on American products, which may negatively affect America’s economy and its relations with major industrial countries.
