Trump’s choice for the Fed “feeds an existential threat” while the independence of the central bank is targeted, says Jpmorgan

This could point out an intention to modify the law on the federal reserve and to reduce the independence of decision -makers, according to JPMorgan analysts.

On Thursday, President Donald Trump appointed Miran, president of the Blanche House’s economic advisers, to fill a vacancy left by Adriana Kugler, who resigned before his mandate in January.

Although it is known for a proposal written before joining the administration which was nicknamed “the Mar-A-Lago agreement” to approach the American trade deficit, another document which he cocorié in 2024 calling for the overhaul of the federal reserve now attracts more attention.

Friday, in a note, JPMorgan analysts led by chief economist Bruce Kasman highlighted the key proposals, such as giving to the power of the United States to the President of the members of the Fed Board of Directors and the presidents of the Fed Bank, giving the Congress the control of the Fed operating budget and the Fed’s regulatory responsibility on the Fed banks and financial markets.

“There is no doubt that the consequence of these reforms would be to significantly increase the president’s influence in relation to American monetary and regulatory policy,” the analysts wrote.

Such changes would require the approval of the congress, and JPMorgan stressed that it is not a clear support for such general changes.

But what is clear is that Miran joins the board of directors of the FED – brazed of a reform program. His 2024 article accused the Fed of suffering from “group thinking” and mission fluctuating, arguing that the Fed changes would really help preserve its independence. JPMorgan does not see it this way.

“The main threat to Fed’s independence is not a turnover with political motivation changing the outcome of the votes,” said analysts. “On the contrary, the appointment feeds an existential threat while the administration seems likely to aim for the Federal Reserve Act to permanently modify the American monetary and regulatory authorities.”

The White House did not immediately respond to a request for comments.

How the Fed could play the defense

Congress has the power to modify the authority and mission of the Central Bank. Professor of Wharton Finance, Jeremy Siegel, reported this potential last month, when he told CNBC that Powell may need to resign in order to preserve the long -term independence of the Fed.

His reasoning: if the economy stumbles, then Trump can indicate Powell as the “perfect scapegoat” and ask the congress to give it more power on the Fed.

“This is a threat. Do not forget, our federal reserve is not at all a part of our Constitution. It is a creature of the American Congress, created by the Federal Reserve Act 1913. All its powers are devoted to Congress,” said Siegel. “The congress has modified the law on the federal reserve several times. It could do it again. This could give powers. It could take powers. ”

Senator Bernie Moreno, R-Ohio, reported the desire to modify the law on the federal reserve, including the interests he pays in bank reserves and his double mandate, although he said that he believed in the independence of the Central Bank.

JPMorgan said the Fed still benefits from support for the Senate, where changes in the Federal Reserve Act would need 60 votes to overcome an obstacle.

However, the Fed will also take the threat of its independence seriously and actively protect it, which could mean “a accommodation” towards the demands of the White House and Congress, predicted analysts.

“Although spectacular changes are not expected, the upcoming pressure on the law of the federal reserve could biaise the policy of policy and regulatory decisions in a direction that clarifies the expenses,” they said.

An inclination towards a monetary relaxation would be in the middle of the incessant pressure of the White House to reduce rates, which remained unchanged as inflationary officials of the Fed officials of Trump prices.

Independence is supposed to isolate the Fed of such political pressure. But the independence of the Fed is a delicate concept, because it derives largely from a mixture of laws, standards, informal agreements and traditions, said Michael Pugliese, principal economist at Wells Fargo, Fortune in an anterior interview.

He thinks that it is very unlikely that the congress will modify the law on the federal reserve to allow a more explicit influence of the White House.

This is because the Democrats would not be, and the Republicans would probably not get rid of the ribbibry rule in the Senate to immediately erode the independence of the Fed, he said.

“Getting rid of the observer would probably open the door to tons, tons and tons of other political discussions on many different questions, not only at the Federal Reserve Act,” said Pugliese. “The filibuster remained as long as it did because the two parties had reasons and did not change it. And maybe it changes one day, but I would be very surprised if the thing that changed was the Fed.”