During the campaign, Donald Trump attacked the Federal Reserve for intervening in the economy in a manner that advantaged the Democratic party in the election. Based on the results of the presidential race, it appears that the voters did not believe so, blaming the Biden economy for their hardship and putting their faith in Donald Trump over his vice president, Kamala Harris.

On Thursday, Federal Chair Jerome Powell announced that the federal funds rate would be slashed by a quarter of a percent, pushing the rate below 4.5 percent. Responding to a question from a reporter, Chair Powell also said he would not resign even if encouraged to do so my President Trump and his adminstration when he takes over the White House in January.

At a Bitcoin event in September, the president-elect interpreted the half-cut implemented earlier that week as a sign “the economy is very bad” but added the caveat that such a cut is only reflective of poor economic conditions if “assuming [the central bank] not playing politics.” Fed leaders reject this view, and have spoken to how their adjustments in monetary policy highlight the strength of the economy and that it can handle the lowering of rates without running into a crisis.

The Fed and politics

The Fed is considered a non-political institution, but that erases the very real impact monetary policy has on the ability of workers to consume and save within the economy. Who gets bailed out, and who doesn’t? Who suffers the most when rates go up? Who loses their jobs when the economy tightens? While the Democrats tried to show voters that inflation was falling, gas prices were down, unemployment remained at a historic low, and the Federal Reserve was beginning to cut interest rates, the personal financial situation of many households pushed voters into the Trump camp or left them disheartened enough to stay home on election day. Exit polls conducted by NBC News found that many voters rated the current state of the economy as “poor” or “not so good.” The Democrats lost the public’s trust on the issue, and no data point would erase the financial stress many households faced. The Fed is not supposed to be a political institution, although the ways it works to favor financial stability at the expense of working conditions are inherently political. Who gets bailed out, and who doesn’t? Who suffers the most when rates go up? Who loses their jobs when the economy tightens?

While Democrats celebrate the historically low unemployment rate, having a job doesn’t necessarily mean it’s a good job that offers fair wages and dignified working conditions. The record-breaking stock market levels are irrelevant to the 50 percent of the population with no investments in it. Although slowing inflation is a positive development, rising housing prices stretch many workers’ paychecks to unsustainable levels.

Lending Tree reported that in 2023, 47 percent of credit card holders carried a balance for at least one month during the year. The average APR applied to a credit card balance last year was 20.9 percent, up from 14.6 percent the first year President Biden was in office. These high rates are partly driven by the rate hikes imposed by the Federal Reserve, as credit card companies factor in the Federal Funds Rate into their own calculations. The two lines move in parallel, and now that rates are being cut, the APR attached to credit cards will likely fall. Though Donald Trump had no impact on the benefit of those with a credit card, he will likely be able to take the credit. The same goes for inflation; while it was an issue the GOP nominee made central to his campaign, price growth is slowing, and if it reverses course and prices start to fall in early 2025, the Republicans will be able to take credit.

Donald Trump wants a say at the Federal Reserve

In October, Donald Trump was asked if he would keep Jerome Powell as Chair of the Federal Reserve. He dodged the question but admitted that he had sought to remove him during his first term because the president felt that Powell was “keeping rates high.”

In August, responding to a question from the press, Trump admitted that he “had it out” with the Chair when he was in the White House. He also said that he believed the president should “at least have a say” in the Fed’s decisions and that he has a better economic instinct than many leaders at the US central bank.