Trump’s Potential Fed Choice Raises Political Alarm
Economists are expressing alarms about Donald Trump’s probable choice of Kevin Hassett, the head of the National Economic Council, to take over as chair of the Federal Reserve from Jerome Powell. Some others say that Hassett’s devotion to Trump might make it hard to tell the difference between politics and monetary policy.
Justin Wolfers, an economist at the University of Michigan, said that putting a political friend in charge of the central bank might lead to the same mistakes that caused inflation to become out of control throughout the world.
Historical Parallels Point to Turkey’s Inflation Disaster
Wolfers compared the situation to Turkey’s economy falling apart under President Recep Tayyip Erdogan, who kept telling his central bank to lower interest rates. His meddling caused inflation to rise past 80% and made the Turkish currency less stable.
He said that political pressure like that in Washington might hurt people’s faith in U.S. monetary policy and make prices less stable.
The Stakes for America’s Financial Future
Powell’s tenure ends in May, so Trump’s next choice might change the country’s economic course. People frequently say that the Fed chair has the “second most powerful job in the world.” This person is in charge of setting interest rates and keeping inflation in check.
Wolfers argued that former presidents chose professionals like Janet Yellen and Ben Bernanke, but Hassett’s choice seemed to be based more on allegiance than on independent competence.
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Trump’s History of Tension With the Federal Reserve
Earlier this year, Trump became upset at the Fed for keeping interest rates the same even though there were worries about inflation. He even said he would sue Powell. The fight led to rumors that Trump wants to give the president more power over the central bank.
Kush Desai, a spokeswoman for the White House, said such rumors were not true and that “President Trump himself will announce personnel decisions.”
Experts Warn of Risks to Monetary Independence
Michael Pearce of Oxford Economics told Newsweek that Hassett’s apparent bias may make Federal Open Market Committee members less credible. He said that less confidence might make it harder for the Fed to manage expectations well.
Pearce also said that Senate confirmation and legislative supervision would still restrict the president’s ability to directly affect monetary choices.
Structural Safeguards Offer Limited Protection
William Silber, a former senior economist with the Council of Economic Advisers, said that the 1913 Federal Reserve Act was meant to protect the bank from pressure from the president. He said that putting a political operator in charge would “undermine the intent of Congress.”
Silber added that whether Hassett fits that description would depend on what he says to Congress when he is selected.
Trump Signals Strong Support for Hassett
Trump intimated at a White House event that his favorite candidate is “a respected person” who is already working for him. Polymarket and Kalshi, two betting sites, say that Hassett has an 80% chance of getting nominated.
When CBS News approached Hassett about the job, he said, “I’d like to do what the president needs me to do.”
Economic Independence or Political Loyalty?
Wolfers came to the conclusion that putting loyalty ahead of knowledge may lead to the same inflationary cycle that is happening in other countries. He wrote on X, “A Republican president once chose Ben Bernanke because brains mattered more than spin.”
As the markets wait for Trump’s official decision early next year, economists are still split. Some think things will stay the same, while others are worried that faith in the Federal Reserve’s independence will be lost.
