The 2024 election is taking place in the wake of a generational surge in inflation. Even as inflation subsides and the Federal Reserve cut rates, Republicans blame Vice President Harris and the Democrats for lingering high prices. Of course, presidents and lawmakers do not set interest rates, making the Fed an attractive target for both parties seeking to deflect voters’ blame.
Neither party platform mentions the central bank nor details views about how the Fed should go about setting interest rates. But both nominees have revealed their stance on this critical economic issue. Former President Donald Trump suggests central bankers should be more responsive to a president’s views about the appropriate level of interest rates. Harris endorses more conventional respect for Fed autonomy.
Signals that Trump would pressure the Fed
During Trump’s term in the White House, he routinely pressured the Fed and his hand-picked Fed chair, Jerome Powell, to lower interest rates, foreshadowing how he might approach the Fed in a second term. Presidents before Bill Clinton sometimes pushed the Fed for lower rates when the economy soured. In contrast, Trump lashed out at Powell and his colleagues even when the Fed met its congressional mandate to sustain a robust jobs market and keep prices stable.
New data capture Trump’s persistent populist pressure on the Fed. Collecting every New York Times article that mentions Trump and Powell and interest rates over the course of the Trump presidency, we count the number of stories each month that mention Trump interjections on monetary policy. The figure below shows the numbers of monthly dovish or hawkish signals (lowering or increasing the cost of money, respectively).
Trump nearly always pushed the Fed for easier money, even demanding “negative” rates once rates sat near zero. Trump also pressured the Powell Fed to stop raising rates in late 2018 as Fed officials continued hiking to tame a red-hot jobs market. Notably, Trump dropped his pressure campaign against the Fed once the global pandemic hit, as the Fed dropped rates to zero to address the economic debacle. Trump sent a rare hawkish signal when the White House announced some of his Fed appointees such as macroeconomist Christopher Waller in 2020.
If elected, would Trump resume pressuring the Fed? Undoubtedly. Trump has already said that as president he should have a say over the Fed’s interest rate decisions—a move economists warn could lead to lower-than-appropriate rates and reignite harmful inflation. Reports also suggest Trump advisors have proposed a broader array of reforms that would chip away at the Fed’s monetary autonomy. One advisor has even suggested that Trump tell the Senate to confirm a “shadow Fed chair,” who would command Fed policy from afar until Powell’s four-year term as chair expires in May 2026.
Republicans’ Project 2025 reveals even more. The report proposes reforms that, if enacted, would largely emasculate the Fed’s policymaking discretion. The plan would eliminate the congressional mandate that the Fed bolster employment, limit the Fed’s emergency lending powers, and abolish some of its key policy tools. The plan also questions whether the nation needs a central bank at all.
Where Democrats stand on the Fed
The Democratic Party platform is silent on monetary policy: Most of Democrats’ economic fixes focus on fiscal policy and regulation. And although Democrats emphasize a commitment to finishing the job to tame inflation, the platform does not mention the Fed’s role in keeping prices low and stable.
Still, Vice President Harris has endorsed a more conventional stance on the authority of the Fed. As she noted this past summer, “The Fed is an independent entity and as president I would never interfere in the decisions that the Fed makes.”
President Biden has rarely opined on what he thinks the Fed should do—though occasionally he lets one slip. Last December, for example, as inflation started to come down, Biden noted to donors that with steady job growth, the economy was at a “sweet spot” and that he was “not encouraging the Fed to raise interest rates. But Biden also publicly expressed support for the Fed’s decision to hike rates to combat inflation early in 2022—even as he expressed respect for central bank independence.
Do not rule out the possibility that a President Harris would follow in Biden’s footsteps: Like many presidents, she might occasionally signal more-dovish views about interest rates but would be unlikely to browbeat the Fed for persistently lower rates. Expect no such reticence from a President Trump. Sometime next year, the next president will have to reappoint or replace Fed Chair Powell before his term ends in 2026. Trump promises he would appoint a loyalist. If voters send Trump back to the White House, the Fed is likely to have a target on its back, no matter how low rates go.
The Fed, rather than its neutral interest rate, might become the target.
The Brookings Institution is committed to quality, independence, and impact.
We are supported by a diverse array of funders. In line with our values and policies, each Brookings publication represents the sole views of its author(s).
Commentary
Candidates’ contrasting plans for the Federal Reserve
October 22, 2024