A bold and controversial plan is being drafted by allies of former President Donald Trump that would fundamentally reshape the American financial system. The proposal, part of the conservative 'Project 2025', aims to dismantle the Federal Reserve's long-standing independence from the White House.
The most striking element of the plan would grant the US President direct authority to demote the current Federal Reserve Chair, Jerome Powell, effectively stripping him of his role in setting interest rates. This would mark an unprecedented politicisation of the nation's central banking system.
A Direct Challenge to Economic Norms
For decades, the Fed has operated independently, with its decisions on monetary policy—such as raising or lowering interest rates—insulated from direct political pressure. This independence is a cornerstone of modern economic policy, designed to ensure decisions are made for the long-term health of the economy, not short-term political gain.
The new plan would shatter this tradition. It proposes that the Fed Chair would report to the Treasury Secretary, a cabinet member who is directly appointed by the President. This would give the executive branch significant influence over the cost of borrowing for everything from mortgages to business loans.
Part of a Broader Conservative Agenda
This initiative is not an isolated idea but a key component of the Project 2025 playbook, a comprehensive manifesto intended to guide a potential second Trump administration. The project outlines a wide-ranging strategy to increase presidential power across numerous federal agencies.
While the plan would face fierce legal and political challenges, its mere existence is sending ripples through financial and political circles. Critics argue that such a move would undermine global confidence in the US economy and could lead to disastrous economic outcomes if interest rates were set to favour political campaigns rather than curb inflation.
The debate underscores the high-stakes battle over the future of US economic policymaking as the next election approaches.
