US President Donald Trump intensified his attack on Federal Reserve Chairman Jerome Powell, on Friday. He urged the Fed’s Board of Governors to step in if Powell didn’t act quickly to cut interest rates.
This statement was made after the Fed kept its main interest rate at between 4.25% and 4.50%.
This decision frustrated Trump who had repeatedly called for steep cuts in borrowing costs to stimulate growth and reduce the debt burden of the federal government.
Trump called Powell “stubborn”, “MORON” on Truth Social.
Donald Trump:
The Board should assume control if Powell does not’substantially lower’ rates. They must do what everyone knows has to be done!
These comments signaled a new escalation of Trump’s feud with Fed Chair, who he had appointed. They also indicated a rising level of political tension as the central banks tries to find a balance between inflation risk and a slowing economic.
Fed faces monetary dissent
Donald Trump launched his latest attack against Powell as cracks began to appear within the Fed.
At the most recent policy meeting, Christopher Waller, and Michelle Bowman broke ranks with Powell for the first time since over thirty years and voted against a quarter point cut.
The signs of weakening on the job market were cited. They also downplayed the recent inflation and said it was mostly due to one-time factors.
Powell is not in agreement. He has called for patience and warned that too much action could reverse the Fed’s course, reversing its progress in reducing inflation.
In future meetings, he has also stated that he is not prepared to make any commitments regarding rate reductions. We’re just getting started. “There’s still more to be done.”
Trump claims that the Fed’s data on inflation are “virtually inexistent”, despite the fact the Fed’s preferred measure of inflation, which is currently 2.6% per year, runs just above the 2% target.
Former President has called for an abrupt 3 point reduction, but economists say that this could lead to higher inflation due to the excessive injection of liquidity in the economy.
This dispute also has a legal and political dimension.
The US Supreme Court ruled in May that Powell could not be removed for policy differences, but the Trump Administration has looked into grounds to dismiss him “for cause,” including cost overruns on a $2.5billion Fed renovation project.
Powell’s term as Fed chair expires on May 20, 2026. Trump will then have the power to name a replacement, pending Senate approval.
Powell’s economics is supported by economists
Powell has been praised for his independence and conservative approach by notable financial figures, such as Jamie Dimon of JPMorgan Chase.
Dimon said that political interference can backfire, and the Fed’s cautious stance could ultimately result in lower interest rates over the long term.
The disappointing US job report on Friday, which showed an unanticipatedly low growth rate of 73,000 jobs in July, and revised downwards the numbers for both May and June, prompted President Trump to call for a reduction in interest rates.
The Fed may be hesitant to reduce rates until it has more information on the inflation trend and economic impacts of tariffs.
As new information becomes available, this post Trump calls Powell an ‘idiot’ and urges the Fed to control rate reductions may change.
