Fed's autonomy at risk

TRESPASSING: 'PRESIDENT SHOULD HAVE A SAY ON SETTING INTEREST RATES'

Donald Trump's return to the White House could put the independence of the US Federal Reserve under strain, potentially weakening its ability to fight against inflation and unemployment free from political interference.

The Fed has a dual mandate from Congress to act independently to tackle both inflation and unemployment - primarily by raising and lowering interest rates.

Anything that undermines the Fed's independence could spook traders in the financial markets, who might come to question if it could effectively tackle inflation.

"The prevailing view for the past 30 years, with the exception of the first Trump administration, has been that it's best to give the Fed the widest possible latitude to conduct monetary policy," said David Wilcox, a senior fellow at the Peterson Institute for International Economics.

"Monetary policy is complicated enough even without having to take that additional consideration," added Wilcox, a former senior advisor to three Fed chairs and Bloomberg's director of US economic research.

The Federal Reserve System includes a decentralized network of 12 regional reserve banks and a seven-member Board of Governors in Washington.