'Trump First' seeks Fed regime change

In the most compelling case of Trump's professed 'America First' agenda actually being 'Trump First', on Sunday, US Fed chair Jerome Powell responded to the real estate-president's bid to gain control over US monetary policy. That's bad news for the US, since Trump has no clue where interest rates ought to be. No politician does. Which is why smart political leaders wisely leave the job to central bankers trained to read the economic evidence. Powell has a few months left as Fed chair, and Trump is frustrated he still doesn't have a pliant rate-setting committee. Powell could continue on that committee as member, which puts into perspective the threat of criminal indictment he faces. Trump soured on Powell after elevating him to the chair during his first term, and the relationship worsened last year, with the Fed resisting pressure from the regime to cut rates. If Powell chooses to continue on the board, it will deny Trump the majority he needs to set the pace of interest rate cuts for the rest of his term.

Central banks are autonomous precisely to counter Trump-like overreach. They stop governments from taking measures that could stoke future inflation, rack up too much debt, and anchor inflation expectations through their neutrality. Monetary policy is not meant to be a political tool. Trump doesn't get that. Fortunately, the US has checks against Oval Office megalomania. Trump is testing those fetters to the limit.

A heavy-handed regime is up against bond vigilantes. If the rest of the world starts cashing in American IOUs, Trump can be stopped - unless Congress or US Supreme Court get there first. Tariffs are one matter. They can be used as leverage over other economies. Interest rates work through the US economy before they travel into the international financial markets. But control over Fed is a bigger fight. US allies that kowtowed over tariffs will be less supple on interest rates. Trump may or may not be returning to office. But governments elsewhere aren't ready to let inflation wreck their re-election plans.