Between the President of the United States and the Chairman of the Federal Reserve, there is usually an 'invisible firewall'. But now, this wall seems to be being broken by the frequent interactions between Trump and Wash.
According to a report in the Wall Street Journal on August 5th, since taking office, U.S. President Donald Trump has made several calls to Federal Reserve Chairman Kevin Warsh to seek advice on topics such as the impact of the Iran war on the U.S. economy and the rapid development of artificial intelligence. Warsh has been chair of the Federal Reserve for less than three months, and this frequent interaction has broken the 'formal and restrained' contact pattern that has existed between U.S. presidents and Federal Reserve chairs for nearly decades, drawing attention to the independence of the Federal Reserve.
Reports say that Trump’s conversations with Wosh are not scheduled in advance, but rather characterized by “concentrated occurrences and intermittent silences” – sometimes there are multiple calls over several days in a row, followed by a period of no contact. Sources familiar with the situation revealed that Trump asked Wosh how the war in Iran affects the U.S. economy, and also discussed the potential economic impacts of rapid advances in artificial intelligence.
However, it is not yet clear whether the two discussed monetary policy. A person familiar with the matter said that since Vash received Senate approval to become the Federal Reserve Chairman, Trump has not made any requests regarding interest rate policies to him.
May 22nd, Washington, D.C., Kevin Wosch was sworn in as the new chairman of the Federal Reserve. Trump held a ceremony for Wosch at the White House. IC Photo
The President of the United States has the authority to nominate the chairman of the Federal Reserve, but the Federal Reserve, as the central bank of the United States, is responsible for independently setting interest rate policies. Maintaining a proper distance between the two roles is considered an important safeguard against political influence on monetary decision-making.
The Wall Street Journal pointed out that it is not uncommon for the president to meet with the chairman of the Federal Reserve from time to time. However, in recent decades, such interactions have usually been formal, scheduled in advance, and through public information, efforts have been made to reduce concerns among the public about the president interfering with interest rate decisions.
In contrast, Trump is accustomed to bypassing traditional communication channels and maintains contact with foreign leaders, corporate executives, and members of Congress through private phones. This personalized communication style also applies to his relationship with Wash.
The relationship between the US President and the Chairman of the Federal Reserve has always been different. Former President Clinton had a close relationship with then-Federal Reserve Chairman Alan Greenspan, even arranging for Greenspan to sit next to First Lady Hillary Clinton during his first State of the Union address in 1993. From Clinton to Obama, several presidents avoided publicly pressuring the Federal Reserve.
The interaction between the U.S. government and the Federal Reserve has also changed due to historical events.
In the early 1970s, President Nixon pressured Federal Reserve Chairman Arthur Burns to implement easing monetary policies. After Nixon was re-elected, the United States faced severe inflation. Since then, a more cautious communication approach developed between the president and the Federal Reserve chairman.
It is worth noting that Trump did not have a good relationship with the Federal Reserve before. He criticized former Federal Reserve Chairman Jerome Powell for not lowering interest rates ‘fast enough’ on several occasions, even threatening to remove him from his position, and described communicating with Powell as ‘speaking into a wall’.
In contrast, Trump’s attitude towards Wach is significantly different. When Wach was sworn in, Trump said he hoped Wach would be “completely independent,” “not looking at me, nor at anyone else, just doing his own work.”
Reports say that Trump has told his political allies that he considers Wash as a trustworthy external economic advisor. Wash also frequently expresses positive views about the U.S. economy when communicating with Trump. Last week, he stated that the most notable feature of the U.S. economy is the strong growth in corporate investments.
However, the growing closeness between Trump and Wash still raises concerns among some people.
The U.S. Senate Banking Committee has repeatedly asked Wash to disclose his communications with the president, focusing on whether their interaction could affect the independence of the Federal Reserve's decision-making.
The White House insists that Trump supports the Federal Reserve’s independence. White House spokesman Kushner DeSire said that Trump “gave Chairman Warnch the space he needed to restore confidence in the Fed’s decisions by the market.” He also emphasized that President Trump has the right to express his views on economic and interest rate issues.
The Federal Reserve declined to comment on this matter.
