Trump keeps feeding uncertainty over Powell

RTHK

4 days ago

Trump keeps feeding uncertainty over Powell
Donald Trump inspects renovations at the Federal Reserve with with Jerome Powell, right, amid suggestions he was looking to fire the chairman over cost overruns. File photo: Reuters
US President Donald Trump has said Federal Reserve chairman Jerome Powell will "most likely" stay in his position even amid his sharp criticism of the central bank's policies.
In an interview with Newsmax that aired on Friday, Trump said he would remove Powell "in a heartbeat" and said the Fed's interest rate was too high but added that others have said Powell's removal would "disturb the market".
"He gets out in seven or eight months and I'll put somebody else in," he said.
Also on Friday, Trump called for the Fed's board of governors to usurp Powell's powers and criticized him for not cutting short-term interest rates.
Posting on his Truth Social platform, Trump called Powell 'stubborn". The Fed chair has been subjected to vicious verbal attacks by the Republican president over several months.
The Fed has the responsibility of stabilizing prices and maximizing employment. Powell has held its benchmark rate for overnight loans constant this year, saying that Fed officials needed to see what impact Trump's massive tariffs had on inflation.
If Powell doesn't 'substantially' lower rates, Trump posted, 'THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!'
Two of the seven Fed governors, Christopher Waller and Michelle Bowman, issued statements on Friday saying they see the tariffs as having a one-time impact on prices and the job market as most likely softening. As a result, the two dissented at the Fed meeting on Wednesday and pushed for slight rate cuts relative to what Trump was seeking.
Even though Trump, who nominated Waller and Bowman, has claimed the US economy is booming, he welcomed their arguments and what he called their strong dissents.
After the Fed announced later in the day that governor Adriana Kugler will step down next week, Trump said Powell should follow her lead and leave, too. 'She knew he was doing the wrong thing on Interest Rates. He should resign, also!' Trump said on social media.
Friday's jobs report showed a rapidly decelerating economy, as just 73,000 jobs were added in July and downward revisions brought down the June and May totals to 14,000 and 19,000, respectively.
Trump sees the rate cuts as leading to stronger growth and lower debt servicing costs for the federal government and homebuyers. He argues there is virtually no inflation, even though the Fed's preferred measure is running at an annual rate of 2.6 percent, slightly higher than the Fed's 2 percent target.
Trump has called for slashing the Fed's benchmark rate by three percentage points, bringing it down dramatically from its current average of 4.33 percent. The risk is that a rate cut that large could cause more money to come into the economy than can be absorbed, possibly causing inflation to accelerate.
The Supreme Court suggested in a May ruling that Trump could not remove Powell for policy disagreements. This led the White House to investigate whether he could be fired for cause because of the cost overruns in the Fed's US$2.5 billion renovation projects .
Powell's term as chair ends in May 2026, at which point Trump can put his Senate-confirmed pick in the seat. (AP/Reuters)