With Elon Musk at Donald Trump’s side to slash 'bureaucracy', is Jerome Powell next?

President-elect Donald Trump’s return to the White House could mean sweeping changes for the Federal Reserve—or potentially its dismantling altogether. 

Adding fuel to this idea, Elon Musk endorsed a recent post by Senator Mike Lee on X (formerly Twitter), which called for abolishing the Fed. Musk backed the post with a “100” emoji, fully signaling his support. 

Lee stated, “The Executive Branch should be under the president’s direction… yet another reason why we should #EndTheFed.”

Musk, a key Trump ally, has now been appointed to head the Department of Government Efficiency (DOGE)—an acronym that references Musk's favorite cryptocurrency, Dogecoin. Joining Musk is Vivek Ramaswamy, a former primary opponent, who, together with Musk, will advise Trump on cutting bureaucratic “waste.” 

Trump likened the project to a “Manhattan Project for government reform,” aiming to “send shockwaves through the system.”

While Trump hasn’t directly called for abolishing the Fed, he’s clear about wanting to reshape its role, even suggesting that Fed officials should consult him on interest rates. 

He sees low rates as essential to his economic goals. Yet, the Fed’s independence, granted by Congress, allows it to act based on economic stability rather than political influence. 

Current Fed Chair Jerome Powell has responded to Trump’s ambitions with a simple, firm “No” when asked if he’d resign at Trump’s request, reminding that the Federal Reserve Act protects him from removal without cause.

Legal obstacles could limit Trump’s influence over the Fed, as recent court rulings have supported the independence of agencies like the Consumer Financial Protection Bureau, which similarly operates with protection against political interference. 

Trump’s previous efforts to pressure Powell to lower rates in 2018 caused considerable market unease, underscoring Wall Street’s preference for an independent Fed free from political pressures.

As Trump prepares to take office, his plans for the Fed remain uncertain. However, any efforts to curb the Fed’s authority could have far-reaching economic consequences, affecting everything from market stability to inflation.