Trump’s Potential Fed Shake-Up: Could Abolishing The Central Bank Be On The Agenda?

As President-elect Donald Trump prepares to return to the White House, attention is on the possible changes he could bring to the Federal Reserve. But there’s a bigger question now taking shape: not just how the Fed will operate under Trump, but whether it will continue to operate at all.

Trump ally Elon Musk added fuel to this uncertainty by resharing a post from Republican Senator Mike Lee of Utah, who called for the abolition of the Fed. Musk’s endorsement, marked by a “100” emoji, hints at the support this idea may have among influential Trump backers.

"The Executive Branch should be under the direction of the president," Lee posted on X (formerly Twitter) shortly after Fed Chair Jerome Powell confirmed he wouldn’t resign if asked by Trump. “The Federal Reserve is just one example of how we’ve deviated from the Constitution in this regard. #EndTheFed,” Lee added.

When asked about Trump’s stance on the issue, spokesperson Karoline Leavitt emphasized that only the president himself could make official policy statements.

Reviving the Call to "End the Fed"

Calls to dismantle the Fed are not new. Former Congressman Ron Paul famously advocated for the Fed’s abolition with his 2009 book, *End the Fed*. More recently, Senator Lee and Representative Thomas Massie introduced bills aiming to transfer the Fed's responsibilities to the Treasury Department, hoping to reshape the nation’s approach to monetary policy.

Trump has not explicitly supported dismantling the Fed but has campaigned for substantial changes to its rules, alarming many economists. On the campaign trail, he pledged to lower interest rates significantly, a move that would influence the cost of borrowing for Americans. However, the power to set these rates is a function of the Fed, operating independently from the executive branch for over 70 years to fulfill its mandate for price stability and employment.

Trump’s Tensions with the Fed: A Legacy of Conflict

Throughout his first term, Trump criticized the Fed and even threatened to demote Fed Chair Jerome Powell, who he blamed for high interest rates. Trump has floated ideas to pressure the Fed into lowering rates, potentially risking inflation spikes.

However, whether Trump could lawfully strip the Fed of its independence or remove Powell is unclear. By law, the Fed Chair can only be dismissed "for cause," a condition typically reserved for significant misconduct, not mere policy disagreements.

Powell was clear about his stance, responding bluntly in a recent press conference: "Not permitted under the law." The Fed declined to comment further.

Could 2025 Be a Watershed Year for the Fed?

The balance of power in Washington after Trump’s election could set the stage for attempts to challenge the Fed’s independence. With a Republican-controlled Senate and a Supreme Court majority appointed by GOP presidents, some see an opening. However, recent Supreme Court decisions have upheld the independence of other agencies structured like the Fed, signaling that any legal battle could be far from straightforward.

Whether Trump will pursue an attempt to dismantle or fundamentally alter the Fed remains uncertain. But as he returns to the White House, the future of America’s central bank could hang in the balance, stirring debate on both sides about the role of the Fed and the boundaries of presidential power.