Washington, DC – As President Donald Trump settles into his second term, a once-unthinkable battle is brewing in Washington: a full-scale assault on the independence of the Federal Reserve.
What was long considered one of the bedrock principles of modern central banking – the ability of the Fed to set interest rates and conduct monetary policy free from short-term political pressure – is facing its most serious challenge in decades, according to economists, former officials, and market watchers.
A Very Public Campaign Against Jerome Powell
Since the November 2024 election, Trump has escalated his attacks on Fed Chair Jerome Powell, a Republican appointee originally nominated by Trump himself in 2017. In a series of late-November 2025 Truth Social posts, the president called Powell “out of touch with reality,” demanded immediate rate cuts, and hinted that he possesses the authority to force the Fed’s hand.
“Interest rates are TOO HIGH! The Fed is killing jobs and hurting Americans. Time for BIG cuts – NOW!” Trump wrote on November 26. Markets reacted immediately, with 10-year Treasury yields dropping nearly 15 basis points in the following 48 hours as investors priced in the possibility of politically driven easing.
Legislative and Legal Fronts Open Up
The pressure is not limited to social media. Republican lawmakers have introduced at least three bills in the new Congress that would strip the Fed of key powers:
- Removing its authority to incorporate climate-risk scenarios in bank stress tests
- Curtailing its consumer-protection and Community Reinvestment Act enforcement roles
- Requiring Senate confirmation for the powerful president of the New York Fed
Meanwhile, a October 2025 ruling by the Fifth Circuit Court of Appeals declared portions of the Fed’s emergency lending facilities unconstitutional, handing critics a legal precedent they intend to expand.
The People Who Could Change Everything
Perhaps most concerning to Fed defenders are Trump’s pending nominations. Among the names circulating for the three open seats on the Federal Reserve Board of Governors is Judy Shelton, a longtime advocate for returning to the gold standard and a vocal critic of central bank independence. Shelton’s confirmation would give the White House a reliable ally inside the marble walls of the Eccles Building.
Leaked internal Fed memos from November 2025, first reported by Bloomberg, reveal staff anxiety over “potential partisan capture” and contingency planning for scenarios in which the White House attempts to direct monetary policy.
Echoes of History – and Warnings from Abroad
Economists are sounding the alarm. Former Fed Governor Kevin Warsh told CNBC that “central bank independence is the institution’s most precious asset. Once politicians get their hands on the printing press, inflation is rarely far behind.”
Harvard professor and former IMF chief economist Kenneth Rogoff drew parallels to Turkey, where President Recep Tayyip Erdoğan’s repeated interference with the central bank pushed inflation above 85% in 2022. “The U.S. starts from a position of extraordinary credibility,” Rogoff said. “But credibility can be squandered surprisingly quickly.”
Even some Trump allies frame the issue as one of “accountability” rather than control. Economist Stephen Moore, an informal Trump advisor, argued on Fox Business that “the Fed answers to no one. A little democratic oversight isn’t the end of the world.” Most mainstream economists strongly disagree.
Markets Are Watching Closely
Investors have taken notice. The dollar weakened 2% against a basket of major currencies in the week following Trump’s most aggressive posts, and implied volatility in interest-rate futures has spiked to levels last seen during the COVID-19 crisis.
With core inflation still hovering around 2.5% – above the Fed’s 2% target – many analysts fear that premature, politically motivated rate cuts could rekindle price pressures just as global growth shows signs of slowing.
A Principle Worth Defending?
The Federal Reserve was deliberately designed in 1913 to be insulated from day-to-day politics precisely because history is littered with examples of governments debasing their currencies for short-term gain. A century later, that insulation is under siege.
As one former senior Fed official put it anonymously: “If the United States becomes just another country where the central bank dances to the president’s tune, the economic consequences will be felt for generations. And once you lose independence, you almost never get it back.”
For now, Jerome Powell and his colleagues insist they will continue to make decisions based solely on the Fed’s dual mandate of maximum employment and price stability. But with political, legislative, legal, and personnel battles all converging at once, the question hanging over Washington – and global markets – is simple:
How much longer can the world’s most powerful central bank remain truly independent?