Can the Next Fed Chair Truly Be Independent From Trump’s Influence?

President Trump has yet to name his pick to replace Jerome H. Powell as chair of the Federal Reserve. But whomever he chooses for one of Washington’s most powerful posts will have to overcome doubts that they are setting interest rates free of influence from the White House or risk eroding the institution’s credibility and causing financial panic.

Investors, economists and former U.S. policymakers warn that Mr. Trump has already undermined the next Fed chair by incessantly attacking the central bank and its current leadership and explicitly acknowledging that he will select only someone who supports lowering borrowing costs.

That criteria has raised concerns that Mr. Powell’s replacement will have made implicit promises to get the job, something that could ultimately constrain the Fed’s ability to implement the right policy settings for the economy if it is at odds with the president’s wishes.

An overtly politicized Fed would buck decades of tradition forged after painful lessons that showed the downsides of the White House meddling in monetary policy decisions. The outcome this time around could be economically calamitous, leading to resurgent inflation and stagnating growth.

“I already don’t trust the next Fed chair, and I don’t even know who it is,” said Dario Perkins, an economist at TS Lombard, a research firm. “There is this perception that Trump has just put in people to be ‘yes-men’ in all different parts of government, so why should the Fed be any different?

Trump’s Demands