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With Chair Jerome Powell’s term expiring in May, Trump has said that he will appoint a new chair early in the new year. While auditions with Treasury Secretary Scott Bessent are continuing, Trump has all but said in so many words that his nominee will be Kevin Hassett, the top White House economic adviser and the candidate personally closest to Trump. At the Fed, Hassett would function as an arm of the White House, the least independent Fed chair ever.
That prospect has spooked the bond market. Major financial houses with large holdings of Treasury bonds have lobbied Bessent not to appoint Hassett. If the Fed lowers rates too much and inflation spikes, that would depress the value of existing Treasury bonds.
Trump has failed in his effort to gain control of the Fed by firing members of the Board of Governors in the middle of their term, but he will eventually have a friendly majority of members of the policy-setting Open Market Committee. With both inflation and unemployment creeping up, the Fed would have to make some hard calls under the best of circumstances. A Fed whose strings are pulled by the White House is far from the best of circumstances.
Trump wants a good economy going into next November’s election, but what does that mean? Relief from the high cost of living, or plentiful well-paid jobs? He can’t have both, at least not via monetary policy.
There are other strategies that might reconcile job growth with price relief, but they are ideologically forbidden in MAGA-land. They include strong antitrust enforcement and other regulatory strategies to prevent corporate price-gouging, fundamental reform of the health care system to lower consumer costs, as well as measures to make renewable forms of electricity cheap and plentiful. In addition, Trump would have to swear off tariffs.
Since Trump will not pursue any of these sensible approaches, he is left trying to take over the Fed. Even if he succeeds, it won’t do much good.
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