How Powell and the Fed Could Change Under President Trump

America's central bank, the Federal Reserve, has been criticized from all sides of the political spectrum for years. With a new presidential administration set to take office in January, the Fed is again in the crosshairs of pundits and policymakers alike.

How This Could Impact Fed Chair Powell

The biggest question mark is Fed Chair Jerome Powell's future. Shortly after the election, Powell was asked if he believed a president could fire him before his term was up. Powell matter-of-factly stated that the law prohibits such an action.

Federal Reserve Chair Jerome "Jay" Powell. Photo copyright: Xinhua News Agency

Most legal analysts agree with Powell's assessment. The president can nominate the Fed Chair for a four-year term but cannot remove them from office. The president also nominates other members to the Federal Reserve Open Market Committee, pending Senate approval. (The FOMC is the body that sets the federal funds rate, the country's most important interest rate.)

The Fed is a quasi-governmental institution. It occupies a strange in-between space where it receives its directives from Congress. Still, it operates independently from the rest of the federal government.

An Act of Congress created the Federal Reserve in 1913. Twice per year, the Chairperson must testify to the House Financial Services Committee and the Senate Banking Committee. Congress dictates that the Fed must follow a "dual mandate" of maintaining price stability and maximum employment.

Still, the legal question of what authority—if any—the president has over the Fed and its members remains a matter of some dispute.

The Relationship Between Trump and Powell

President Trump nominated Powell to replace Janet Yellen as Fed Chair in 2018. Powell's term doesn't end until 2026, after being re-nominated under President Biden.

Trump has, at times, been vaguely critical of Powell, but he has more often than not been supportive. In general, during his first presidency, Trump advocated for lower interest rates. After drastically raising rates above 5% under the Biden administration, the FOMC cut interest rates at three consecutive meetings. In total, they lowered rates by 100 basis points (1.00%).

Despite the legal speculation about Powell's job security, there doesn't appear to be a public rift between him and Trump. Of course, that may change following Inauguration Day on January 20th, 2025.

Will Trump Nominate Judy Shelton as Fed Chair?

Many people are suggesting that Trump will consider economist Judy Shelton as his next Fed nominee. Trump previously nominated Shelton to join the Federal Reserve in 2019, but the Senate ultimately scuttled her nomination.

President Trump's nominees to his cabinet and other agencies are expected to make significant changes. Photo credit: Gage Skidmore

Shelton has been an economic advisor to Trump and is known for her pro-gold views on monetary policy. She suggested that the U.S. Treasury could restore stability and trust in the dollar by issuing gold-convertible bonds with a 50-year maturity. Shelton has described this as something akin to a new Bretton Woods system.

Mrs. Shelton isn't the only gold advocate Trump has been staffing his administration with. His pick to lead the Treasury Department, Scott Bessent, has floated a similar idea to Shelton's: the U.S. Treasury could issue securities backed by gold. This would be a major shift compared to previous Secretaries of the Treasury.

With renewed momentum toward gold's role in the monetary system, the possibility grows that the U.S. government (along with other world governments, particularly in China) could devalue its currency against gold. This would drive up the gold price in U.S. dollar terms. Naturally, that means that buying gold before these changes come is a smart move.

If you're interested in shopping for gold and silver online, follow the links below.

Buy Gold Bullion at Gainesville Coins

Buy Silver Bullion at Gainesville Coins