On Friday, President Donald Trump criticized Fed Chair Jerome Powell for failing to lower short-term interest rates and called on the board of governors to usurp Powell’s authority.
Trump described Powell as “stubborn” in a post on his Truth Social website. Over the past few months, the Republican president has been verbally attacking the Fed head.
The Fed is in charge of maintaining price stability and increasing employment.
Powell stated that Fed officials needed to observe the effect of Trump’s huge tariffs on inflation, which is why it has kept its benchmark rate for overnight loans unchanged this year.
Trump stated that “THE BOARD SHOULD ASSUME CONTROL AND DO WHAT EVERYONE KNOWS HAS TO BE DONE” if Powell doesn’t “substantially” decrease rates.
According to Trump, the rate cuts will boost GDP and reduce the cost of loan payments for both homebuyers and the federal government.
Even though the Fed’s preferred metric is operating at an annual pace of 2.6%, which is just higher than the Fed’s 2% target, the president maintains that there is almost no inflation.
To drastically reduce the Fed’s benchmark rate from its current average of 4.33%, Trump has called for cutting it by 3 percentage points.
A rate drop of that magnitude carries the risk of bringing in more money than the economy can absorb, which could hasten inflation.
In a May decision, the Supreme Court implied that Trump could not fire Powell due to policy differences.
As a result of the cost overruns in its $2.5 billion refurbishment projects, the White House looked into whether the Fed chair could be fired for cause.
When Powell’s tenure as chair ends in May 2026, Trump will have the opportunity to appoint a Senate-confirmed candidate to the position.
