Trump criticized Fed Chairman Powell's refusal to cut interest rates, stating that the dismissal should happen as soon as possible.
The US President, Donald Trump, once again expressed his strong views on his social media platform early Thursday morning (April 17). He directly pointed out that Powell's reluctance to cut interest rates was "too late and wrong," and publicly stated: "The sooner Powell is dismissed, the better." The Federal Reserve currently maintains its benchmark interest rate at 4.25%-4.50%, without any adjustments since last December, reflecting the institution's cautious stance towards the current economic situation.
In his post, Trump wrote: "The European Central Bank has cut interest rates for the seventh consecutive time, 'too late,' but Powell remains inactive. His report yesterday was just another typical chaotic speech." He emphasized that with falling oil prices, declining food prices, and even eggs, and the US "becoming richer through tariffs," it was "the perfect time to cut interest rates."
He further pointed out: "Powell should have followed the example of the European Central Bank by cutting interest rates earlier, but he should at least do it immediately now. This person is always too late and wrong; dismissing him as soon as possible is best!"
Trump's remarks formed a stark contrast to Powell's speech the day before at the Economic Club of Chicago. Powell clearly stated that the Federal Reserve would continue to maintain policy independence and adhere to its dual mandate granted by Congress, promoting maximum employment and price stability.
Powell warned that the reappointment of the Trump administration brought about "very fundamental policy changes," including "comprehensive tariffs far exceeding expectations." He said that such changes were unprecedented in modern history, putting the Federal Reserve into uncharted territory and facing a difficult situation with stagflation risks.
In his speech, Powell stated: "Tariffs are likely to cause at least a short-term increase in inflation, and these effects may persist depending on the speed and breadth of price reactions." He frankly admitted that the Federal Reserve currently found it difficult to make a clear response to the direction of policy, "We need more economic information to understand how uncertainty will evolve over the next few months."
The Federal Reserve is independent of the US government, and the White House usually does not openly lobby the Federal Reserve. However, after taking office, Trump continuously pressured Powell to lower US interest rates and even publicly threatened to "remove Powell's hat."
Powell was first appointed by Trump in 2018 and later reappointed by the Biden administration in 2021, with his term lasting until May 2026.
Trump's fierce criticism of Federal Reserve Chairman Powell this time was another intense collision between his economic philosophy and the Federal Reserve's policies, with complex political and economic factors behind it.
From an economic perspective, Trump's view had obvious one-sidedness. He believed that with falling oil prices, declining food prices, and the US "becoming richer through tariffs," it was the perfect time to cut interest rates. This logic did not hold up. Tariffs were not as effective in increasing wealth as he claimed. After imposing tariffs, many companies faced rising costs, export obstacles, and consumer price pressures, with negative impacts on the US economy gradually emerging. Moreover, the Federal Reserve maintained the benchmark interest rate unchanged based on a comprehensive consideration of the overall economic situation. Economic growth, employment data, and inflation levels were all important reference indicators. Although there were signs of slowing economic growth, the labor market still had some resilience, and inflation remained at a certain level. Hasty interest rate cuts might bring new economic problems, such as uncontrolled inflation or asset bubbles. Powell emphasized that the Federal Reserve should adhere to its dual mission of promoting maximum employment and price stability granted by Congress and not be easily swayed by political pressure, which was a professional and responsible performance.
From a political perspective, Trump's continuous pressure on Powell to cut interest rates and his threats of dismissal had multiple purposes. First, he sought to find a scapegoat for his own economic policies. Trump's tariff policies and other economic measures were not effective, and he attempted to shift the responsibility for economic difficulties onto the Federal Reserve, criticizing Powell to divert public attention and reduce the political risk caused by policy failures. Second, he hoped to stimulate short-term rapid economic growth by intervening in the Federal Reserve's monetary policy, adding points to his political approval rating and paving the way for future political activities. However, this disregard for the Federal Reserve's independence undermined the long-standing tradition of relative independence between US monetary policy and political decision-making. If this precedent were set, it would turn the Federal Reserve into a political tool, damaging the stability and credibility of the US financial system.
In addition, the conflict between Trump and Powell has been ongoing for a long time. Powell was appointed by Trump but insisted on independent judgment in monetary policy, repeatedly failing to meet Trump's demands for interest rate cuts, leading to tense relations between them. Trump's sharp words this time also reflected his anger at Powell's disobedience reaching a new height. However, Powell's independence is legally guaranteed, and he clearly stated that the Federal Reserve would maintain policy independence. Trump's attempt to dismiss Powell was no easy feat. The future course of this game between the president and the Federal Reserve chairman was full of uncertainty, and its outcome would undoubtedly have a profound impact on the US economy and global financial markets.
Source: https://www.toutiao.com/article/1829671177548868/
Disclaimer: The article represents the author's personal views only.