【By Chen Sijia, Observer Group】According to CCTV News, on July 24 local time, U.S. President Trump visited the Federal Reserve, inspecting the $2.5 billion renovation project of the Federal Reserve building. Trump also discussed interest rate issues with Federal Reserve Chair Jerome Powell, saying that "this conversation was very effective." This is the first time in nearly 20 years that a sitting U.S. president has visited the Federal Reserve.

During the inspection, Trump once again criticized the cost of the renovation project, calling the Federal Reserve's project "severely over budget." He also said that if Powell wanted to calm the White House's dissatisfaction, the Federal Reserve needed to cut interest rates. In the view of some analysts, the Federal Reserve has not lowered interest rates as requested by Trump, which has caused his anger, and he and Republican lawmakers have frequently targeted the Federal Reserve renovation project, possibly seeking an excuse to remove Powell.

Trump has repeatedly called for the Federal Reserve to cut interest rates, arguing that the Federal Reserve maintaining high interest rates has put the federal government into a dilemma of paying large interest costs on its debt, increasing the difficulty for businesses and consumers to borrow money. However, financial analysts pointed out that the current level of inflation in the United States is still higher than expected, and cutting interest rates too early could exacerbate the risk of inflation in the United States.

"Trump wants an excuse to remove Powell"

The two Federal Reserve buildings located in Washington D.C. were built in the 1930s and had never undergone renovations before, requiring new pipes, electricity, heating, water, and other infrastructure. The renovation project was approved by the Federal Reserve Board in 2017 and started in 2022. However, the project has experienced cost overruns in recent years, with costs rising from an estimated $1.9 billion in 2021 to $2.5 billion now.

However, Trump claimed that the actual cost of the Federal Reserve project had reached $3.1 billion. Before departing, he posted on social media: "Preparing to inspect the $3.1 billion (or even more) construction project of the Federal Reserve. Accompanying me are Federal Reserve Chair Powell, Senator Tim Scott, Senator Tom Tillis, Office of Management and Budget Director Russell Vought, Chairman of the Boards of Fannie Mae and Freddie Mac Bill Poole, members of the National Capital Planning Commission appointed by me James Blair and Will Shafer, and other construction professionals."

During the visit to the Federal Reserve, Trump once again questioned the cost of the renovation: "It seems the cost is about $3.1 billion. It has increased a little, or maybe a lot."

Trump and Powell then had a debate over the cost issue. Trump, who made his fortune through real estate companies, presented a cost list, insisting that the project cost had reached $3.1 billion. Powell stated that the numbers provided by Trump were exaggerated, including the costs related to another building that was reopened in 2021.

Trump meets with Powell during the inspection of the Federal Reserve renovation project. Visual China

Trump also discussed interest rate issues with Powell, once again urging the Federal Reserve to cut interest rates. He said, "We should maintain the lowest interest rates. If we lower them by three percentage points, we can save more than $1 trillion. It just requires a transfer on paper, without cutting any costs or building anything. Just waving a hand and saying we want to cut interest rates, and we can save $1 trillion every year."

After the inspection, Trump posted on his self-created social platform "Truth Social," stating: "The cost overrun is significant, but the good news is that our country is developing well, almost able to afford any expenses — even the cost of this building! I will keep an eye on the progress and hope to contribute some professional expertise. As everyone knows, I renovated the old post office on Pennsylvania Avenue and achieved great success."

The old post office building in Washington, D.C., was transformed by the Trump Organization into a luxury hotel a few years ago, with a two-year renovation costing about $200 million. The hotel opened in 2016 and was sold in 2022. Trump used this to criticize the cost of the Federal Reserve renovation project: "The total cost of this project is much less than the Federal Reserve building, yet the scale is several times larger. In short, let's complete it as soon as possible. More importantly, lower the interest rates!"

This is the first time in nearly 20 years that a sitting U.S. president has visited the Federal Reserve. Congress grants the Federal Reserve independence, and once Federal Reserve officials are confirmed, the president no longer has direct influence. The Federal Reserve can decide on its own whether to take stimulus measures to boost the economy or "brake" when the economy is overheating.

Since Trump took office, he has repeatedly criticized the Federal Reserve, complaining that it has been unwilling to cut interest rates and has even threatened to fire Powell. However, the U.S. Supreme Court recently confirmed that senior Federal Reserve officials can only be removed for "just cause." Powell's term as Federal Reserve Chair will end in May 2026, and he has not announced any plans to resign earlier.

Some analysts believe that the recent frequent criticism of the Federal Reserve renovation project by the Trump administration may be an attempt to find a reason to remove Powell. During the visit, when asked by American media how he would deal with contractors who overspent, Trump said, "Generally, what would I do? I would fire him."

When discussing what actions Powell could take to calm the White House's dissatisfaction, Trump said, "Well, I hope he can lower the interest rates. What else can I say?"

Office of Management and Budget Director Russell Vought had already criticized the project earlier this month, demanding that Powell provide more details. Vought stated in a public letter to Powell: "You have not tried to correct the Federal Reserve's financial condition, but instead continued to push forward the lavish renovation of the Washington D.C. headquarters." He also claimed that Powell had "serious mismanagement" of the Federal Reserve.

Republican Representative Anna Paulina Luna recently accused Powell of lying and recommended that the Department of Justice bring criminal charges against him. Luna claimed that Powell lied about the luxurious facilities in the Federal Reserve's Eccles Building and misrepresented the maintenance status of the building. She stated that Powell's claim that "cost increases were to simplify construction and avoid further delays" was false.

As Trump and Republican lawmakers continue to criticize the Federal Reserve, Powell faces an unfavorable political environment. If the Federal Reserve chooses to cut interest rates, it would appear as yielding to Trump's pressure; if they maintain interest rates, the Republicans' attacks could damage the Federal Reserve's reputation. A White House official revealed last week that the Trump administration repeatedly emphasized the cost issues of the Federal Reserve renovation project, partly to "damage this guy's image."

Trump advocates for interest rate cuts, while the Federal Reserve remains cautious

Trump has repeatedly claimed that due to the Federal Reserve maintaining high interest rates, the federal government has fallen into a dilemma of paying large interest costs on its debt, increasing the difficulty for businesses and consumers to borrow money. He insists that if the Federal Reserve lowers interest rates, it would save the U.S. government a large amount of money. Additionally, the tax and spending bills pushed by the Trump administration are expected to significantly increase the federal deficit, and high interest rates would force the federal government to allocate more funds to pay for debt interest.

Analysts have also speculated that Trump's frequent attacks on Powell are to portray him as a "villain." Once inflation surges, unemployment rises, or something else happens, he could blame this "villain," saying it's all because Powell waited too long to cut interest rates, and that the Federal Reserve chairman should listen to the "smarter president's" advice.

Considering that Trump is currently caught up in the Epstein case controversy, some speculate that he might be trying to shift public attention by criticizing the Federal Reserve.

However, the Federal Reserve has remained cautious about cutting interest rates too early. The Federal Reserve aims to keep the U.S. inflation rate within 2%, but the last time inflation was below this target was in early 2021, and the current price levels in the U.S. are still slightly above the target. Most economists predict that the U.S. inflation rate may rise to over 3% for the remainder of the year.

David Wilcox, a senior researcher at the Peterson Institute for International Economics, stated that under these circumstances, the Federal Reserve's caution about prematurely relaxing monetary policy is understandable.

Trump's tariff policies have already affected the U.S. economy. Data released by the U.S. Department of Labor show that the U.S. consumer price index (CPI) rose 0.3% in June compared to the previous month and 2.7% compared to the same period last year.

Greg McBride, chief financial analyst at consumer financial services company Bankrate, said that the current U.S. inflation rate is still higher than expected, "Since December last year, the Federal Reserve has maintained a wait-and-see approach, keeping interest rates unchanged, reflecting the uncertainty of the U.S. economic resilience and the inflation path."

Mark Higgins, vice president at investment advisory firm Index Fund Advisors, pointed out that cutting interest rates too early could lead to failure in the U.S. efforts to control inflation, "The situation now is that Trump is pressuring the Federal Reserve to cut interest rates, but the Federal Reserve doesn't have much flexibility to do so. To curb inflation, they must keep high interest rates for a longer period."

The last time the Federal Reserve cut interest rates was at the end of 2024, and market predictions suggest that the Federal Reserve may cut interest rates again in September this year. However, analysts warned that Trump's request for a reduction of more than 2 percentage points could exacerbate the risk of inflation in the United States. Among the 12 members of the Federal Reserve's Open Market Committee, opinions on cutting interest rates differ, but no one has expressed support for Trump's request for a rate cut.

This article is an exclusive contribution from Observer Group. Unauthorized reproduction is prohibited.

Original: https://www.toutiao.com/article/7530863809053999654/

Statement: This article represents the views of the author and is not necessarily the views of the publisher. Please express your opinion by clicking on the [top/vote] button below.