The establishment of the US Federal Reserve in 1913, in the aftermath of the banking panic of 1907, was intended to insulate monetary policy from the turbulence of politics. Lawmakers recognised that no modern economy could remain stable if decisions on interest rates, liquidity and inflation were dictated by the short-term interests of a president or the ruling party. The Fed was therefore designed as an institution distinct from both the White House and Congress. It was meant to act as an impartial referee, standing above political contest. Over the past century, this independence has underpinned the dollar's rise as the world's reserve currency and cemented its role as a symbol of global trust. Trump's Escalating Confrontation That independence is now under its most acute strain in decades. President Donald Trump has gone far beyond the public complaints and social media broadsides that marked his first term. His current approach involves threats to dismiss governors such as Lisa Cook, efforts to install partisan loyalists on the Board of Governors, and attempts to influence appointments across the regional Federal Reserve Banks. This is more than political noise. It is a calculated attempt to redefine the relationship between the executive branch and the Fed. And it comes at a precarious moment: a record US fiscal deficit, eroding market confidence, the rise of rival blocs such as China and the BRICS, and accelerating global efforts at de-dollarisation. Any erosion of the Fed's credibility would reverberate far beyond US borders, triggering structural shifts in the international monetary order. The Many Faces of Politicisation Politicisation of the Fed extends well beyond interest-rate policy. It now manifests across multiple fronts: Leadership pressure: efforts to replace independent governors with partisan appointees. Policy timing: demands to accelerate or delay rate decisions in line with electoral cycles. Fiscal accommodation: pressure on the Fed to absorb government debt as deficits swell. Control of messaging: attempts to shape Fed communications into political endorsements. Legislative interference: proposals to curb the Fed's autonomy and subject it to partisan oversight. Media campaigns: public attacks on Chair Jerome Powell, casting the Fed as an obstacle to growth. Shifting blame: attributing unemployment or slowdowns to Fed policy rather than fiscal or trade missteps. Data manipulation: fears of political pressure to withhold or distort inconvenient research. Partisan appointments: moves to politicise regional Fed banks with political loyalists. Manufactured crises: leveraging disputes such as the debt ceiling to coerce Fed decision-making. These practices may not all occur simultaneously. Yet collectively they form a pattern of pressure that risks transforming the Fed from a guarantor of global stability into a political instrument of the executive — the most dangerous outcome of all. From Johnson to Trump: A Persistent Pattern Presidential pressure on the Fed is not new. In the 1960s, Lyndon Johnson berated Chair William McChesney Martin for contemplating rate rises during the Vietnam War, confronting him at his Texas ranch with the line: "My boys are dying in Vietnam, and you're raising interest rates against me?" In the 1970s, Richard Nixon leaned heavily on Chair Arthur Burns to ease policy ahead of the 1972 election, fuelling the inflationary spiral of that decade. In the early 1990s, George H.W. Bush publicly blamed Alan Greenspan for refusing to cut rates aggressively enough — a decision he claimed contributed to his defeat by Bill Clinton. Even presidents who avoided open confrontation, such as Ronald Reagan, voiced frustration with Chair Paul Volcker's aggressive tightening to curb inflation. Trump, however, is different. Previous interventions were episodic, tied to immediate electoral concerns. What he seeks is more systematic: to recast the Fed as an extension of the White House rather than an independent authority. The Federal Reserve has never been just another central bank. It has been the cornerstone of the dollar's credibility and the foundation of America's economic dominance. Undermining its independence would not only place US monetary policy at the mercy of partisan cycles; it would destabilise the global financial system that rests upon it. Past episodes under Johnson, Nixon or Bush were troubling but temporary. The present challenge runs deeper: an attempt to rewrite the institutional rules of the game. Protecting the Fed's independence is therefore no longer a purely domestic issue. It is a question with profound consequences for every country and every economy still tied to the dollar.
