Trump's Executive Orders Leave Imprint on the Fed

New York Times

07-02-2025

President Trump has so far restrained himself from trying to meddle with the Federal Reserve on matters related to monetary policy during his second term. But some of the more than 50 executive orders he has signed since returning to the White House are leaving an imprint on the central bank.
The latest evidence is a decision by the Fed to halt hiring for permanent workers. The central bank has removed all job postings listed on its website aside from a single summer internship opportunity.
The Fed acted after Mr. Trump mandated a governmentwide hiring freeze, ordering that no federal position vacant at that time could be filled and no new positions created. The only exemptions were granted for jobs related to military personnel, immigration enforcement, national security and public safety.
As a wholly independent organization that strives to operate apolitically, the Fed is not legally obligated to carry out decrees by the executive branch. But its decision to do so in certain cases reflects a strategy of sorts: Align with the executive branch when the Fed sees it is appropriate and lawful and, above all else, safeguard the independence of the central bank's monetary policy decisions.
'The Fed has historically zealously guarded its independence,' said Jeremy Kress, a former Fed banking regulator who is now co-faculty director of the University of Michigan's Center on Finance, Law & Policy. 'The Fed is trying to demarcate some boundaries of executive influence.'
Jerome H. Powell, the Fed chair, touched on aspects of this approach at a news conference last week when pressed about changes taking place at the central bank since the start of Mr. Trump's second term.
That included whether the Fed remained committed to diversity, equity and inclusion efforts in the wake of Mr. Trump's executive order instructing federal workers to cease such activities.
'As has been our practice over many administrations, we are working to align our policies with the executive orders as appropriate and consistent with applicable law,' Mr. Powell said.
The Fed recently removed a 'Diversity and Inclusion' section from its website. The section highlighted the central bank's efforts to 'promote equal employment opportunity and diversity' and included a pledge to 'work to foster diversity in procurement, with a focus on minority-owned and women-owned businesses.' Regional Federal Reserve banks have followed suit.
The decision to adhere to the executive order on hiring mirrored a similar one made by Janet L. Yellen when she led the Fed during Mr. Trump's first term. As outlined in the Fed's Annual Performance Report for 2017 — Ms. Yellen's final full year as chair — the central bank 'voluntarily complied' with a temporary hiring freeze as well as a memorandum from the Office of Management and Budget for government agencies to enhance 'efficiency and effectiveness.'
Even the Fed's practice of releasing an annual report since the mid-1990s reflects its choice to be in lock step with prevailing law when it sees fit. The Fed has long explained its decision to publish one yearly as embodying the 'spirit' of the Government Performance and Results Act of 1993, which required federal agencies to prepare a strategic plan and a report.
Mr. Trump's actions targeting climate-related initiatives have also had an impact. The Federal Reserve Bank of New York recently dropped out of cosponsoring a conference with New York University's Stern School of Business, according to a document seen by The New York Times.
The event, which is still set to take place in May, plans to focus on the 'impact of climate migration on economic output, household welfare and consumption' and 'the effect of natural disasters and disaster mitigation on output and financial stability,' among other topics.
The San Francisco Fed will now no longer host a virtual seminar on climate economics that it had regularly organized since 2020, a person familiar with the matter said. Upcoming sessions were recently postponed, and videos of earlier sessions have been removed from its website.
One economist who was a regular attendee expressed the sense that, for researchers, highlighting or putting a priority on climate-related work was no long considered a good idea.
The Fed announced just days before Mr. Trump's inauguration that it was withdrawing from an international group of central banks and regulators focusing on climate-related risks in the financial sector, the Network for Greening the Financial System. Mr. Powell told reporters last week that he had decided to bring the matter to the Fed's Board of Governors 'some months ago' but that he was 'aware of how it can look.'
'It was really not driven by politics. It was driven by the disconnect between the work of the N.G.F.S. and our mandate,' he said, referring to the Fed's congressionally designated goals of maintaining a healthy labor market and achieving low, stable inflation.
The pullback extends to professional enrichment, as Peter Tufano, a professor at Harvard Business School who organizes a course for researchers on climate finance, witnessed firsthand.
Last fall, employees at 14 central banks and financial regulators around the world — including seven in the United States — were slated to participate in the free sessions, which are open to academics, practitioners and policymakers. Soon after the inauguration, Dr. Tufano said, the federal employees who had enrolled in the 2025 events contacted him to withdraw, citing directives from the new administration.
Some said they were not even supposed to look at the course materials, which include papers and classes on asset pricing, carbon disclosure and how climate change affects household finances.
'It's the first time in my life I've had a set of students who uniformly wanted to learn something and were told that they weren't allowed to do that,' Dr. Tufano said.
Changes have also occurred on the regulatory side. Michael Barr, the Fed's vice chair for supervision, announced just weeks before Mr. Trump became president again that he would step down from his role to avoid a lengthy legal battle with Mr. Trump that he feared would damage the central bank.
On other regulatory matters, however, the Fed has been more reluctant to comply with directives from the executive branch. Rule changes of that nature also require the seven-person Board of Governors to vote.
Mr. Kress cited the Fed's decision in 2021 to disregard an executive order by President Joseph R. Biden Jr. calling on regulators to strengthen oversight of bank mergers. In explaining the decision at an event in April, Mr. Barr said the central bank already had a 'pretty robust process that follows our existing guidelines in this area.'
These decisions in the aggregate have generated unease but also understanding about how the Fed decides which orders to comply with and which to ignore and about its overarching interest in protecting its independence in setting interest rates.
'They'll give up almost everything to try to maintain independent monetary policy and not have to raise and lower interest rates to suit the president,' said Glenn Rudebusch, a former senior adviser at the San Francisco Fed who spearheaded the climate seminar just over four years ago. 'They're willing to pare away quite a bit of other stuff for that.'
The Fed declined to comment beyond pointing to Mr. Powell's statement at the January news conference. The Federal Reserve Banks of New York and San Francisco declined to comment.