So far, President Trump has been curbing his attempts to interfere with the Federal Reserve in his second term on matters related to monetary policy. However, some of the more than 50 executive orders he has signed since returning to the White House have left a mark on the central bank.
The latest evidence is the Fed’s decision to suspend permanent workers. The central bank has deleted all job listings listed on its website, except for one summer internship opportunity.
The Fed acted after Trump ordered a government-wide employment freeze, ordering that he could not fill his federal position at the time and that new positions were not created. A sole exemption was granted for employment related to military personnel, immigration enforcement, national security and public safety.
As a completely independent organisation seeking to operate non-politically, the Fed has no legal obligation to enforce the laws by the administrative department. However, the decision to do so in certain cases reflects some kind of strategy. If the Fed believes it is appropriate and legal, and above all protects the independence of central bank financial policy decisions, it will be consistent with the administrative department.
“The Fed has historically been a keen guardian of its independence,” said Jeremy Cress, a former Fed banking regulator who is co-directed by the University of Michigan’s Center for Finance, Law and Policy. “The Fed is trying to demarcate the boundaries of enforcement’s impact.”
Fed Chairman Jerome H. Powell touched on the aspects of this approach at a press conference last week, scrutinizing the changes that have been happening at the central bank since the start of Trump’s second term.
This includes whether the Federal Reserve has committed to diversity, equity and inclusive efforts to direct federal workers to halt such activities.
“As our practice around many administrations, we are working to match our policies with executive orders to match applicable law,” Powell said.
The Fed recently removed the “Diversity and Inclusion” section from its website. This section highlights the efforts of central banks to “promote equal employment opportunities and diversity” and “work to promote procurement diversity with a focus on minority and women-owned businesses.” “I have included the pledge. Regional Federal Reserve banks are following along.
The decision to comply with the executive order on employment reflects a similar one when Janet L. Yellen led the Fed during Trump’s first term. As outlined in the 2017 Fed’s Annual Performance Report (his last year as Chairman of Mr Yellen), the central bank has a temporary job freeze and a memorandum from the Administration and Budget Office of Government Agency and “voluntarily adhered to this.” Efficiency and effectiveness. ”
Even the Fed’s practice of publishing annual reports since the mid-1990s reflects the choice to be in lockstep with laws that appear appropriate. For a long time, the Fed has explained its decision to release it annually as embodying the “spirit” of the 1993 government performance and outcomes law.
Trump’s actions targeting climate-related initiatives also had an impact. The Federal Reserve Bank of New York recently held a meeting with New York University’s Stern School of Business, according to documents seen by the New York Times.
The event, which is still scheduled to take place in May, will focus on “the impact of climate movement on economic output, household welfare and consumption” and “the impact of natural disasters and disaster mitigation on production and financial stability.” I’m planning to do this. Other topics.
The San Francisco Fed said it will no longer hold virtual seminars on climate economics, which have been organized regularly since 2020. Upcoming sessions have been recently postponed, and videos from previous sessions have been removed from the website.
One economist, who was a regular attendee, expressed the sense that emphasising or prioritizing climate-related work or prioritizing it would not be considered a good idea for a long time. .
A few days before Trump took office, the Fed announced it had withdrawn from international groups of central banks and regulators focusing on climate-related risks in the financial sector, a network that greens the financial system. I did. Powell told reporters last week that he decided to bring the issue to the Fed’s board “a few months ago” but “I know what it looks like.”
“It wasn’t really politically driven. It was driven by the disconnect between the work of NGFS and our mission,” he said.
Peter Tufano, a professor at Harvard Business School, is expanding to professional enrichment as he organizes courses for climate funding researchers.
Last fall, employees of 14 central banks and financial regulators worldwide (including seven in the US) were scheduled to participate in free sessions open to academics, practitioners and policymakers. Shortly after the inauguration, a federal employee who registered for the 2025 event said he would contact him and withdraw, citing an order from the new administration.
Some people said they weren’t even expected to look at course materials, including papers and classes on asset pricing, carbon disclosures and how climate change affects domestic finances.
“This is the first time in my life I have had a set of students who were told they were uniformly hoping to learn something and not allowed to do it,” Dr. Tufano said. I did.
Changes have also been occurring on the regulatory side. Federal Reserve Vice-Chairman Michael Burr announced that he would step down from his role in avoiding a long legal battle with Trump a few weeks before Trump became president again.
However, on other regulatory issues, the Fed has been more reluctant to follow directives from the administrative department. Changes to rules of that nature require a seven-man committee of governors to vote.
Cress cited the Fed’s 2021 decision to ignore executive orders by President Joseph R. Biden Jr. He called on regulators to increase surveillance of bank mergers. In explaining the decision at the April event, Barr said the central bank already had a “pretty robust process to follow existing guidelines in the sector.”
These decisions on the aggregate have created anxiety, but also understand which orders the Fed will comply with, which orders should be ignored, and the comprehensive interest in protecting independence in setting interest rates. It’s there.
“They don’t have to give up almost everything to try to maintain independent monetary policy and lower interest rates to suit the president,” said Glenn Ledebusch, a former senior adviser at the San Francisco FED, at the forefront of the climate seminar. said Glenn Ledebusch, who was standing there. Four years ago. “They are willing to drive away the others quite a bit for that.”
The Fed refused to comment beyond pointing out Powell’s statement at a January press conference. The Federal Reserve Banks in New York and San Francisco declined to comment.
Lydia Depiris contributed to the report from New York.
