Trump to visit Fed on Thursday, ramping up pressure on Powell

Indian Express

3 days ago

US President Donald Trump, a robust critic of Federal Reserve Chair Jerome Powell, will visit the central bank on Thursday, the White House said, a surprise move that escalates tension between the administration and the Fed.
Trump has lambasted Powell repeatedly for not cutting US interest rates more aggressively, calling him a 'numbskull' on Tuesday and musing publicly about firing him.
The Republican president, during his first term, nominated Powell to lead the bank but has since soured on his pick over disagreements about interest rates and the economy. Between Trump's stints in office, Democratic President Joe Biden nominated Powell for a second term.
Adding fuel to Trump's ire, White House officials have accused the Fed of mismanaging the renovation of two historic buildings in Washington, DC, suggesting poor oversight and potential fraud. White House budget director Russell Vought has pegged the cost overrun at '$700 million and counting.'
White House deputy chief of staff James Blair said this week that administration officials would be visiting the Fed on Thursday but did not say the president would join.
In a schedule released to the media on Wednesday night, the White House said Trump would visit the Fed at 4 pm (2000 GMT) on Thursday. It did not say whether Trump would meet with Powell.
A Federal Reserve official did not respond to a request for comment.
Initial market reaction to the news of Trump's visit was subdued, with the yield on benchmark 10-year Treasury bonds steady at 4.387 per cent in Asian trading hours and the dollar weakening slightly.
Trump's public criticism of Powell and flirtation with firing him have previously upset financial markets and threatened a key underpinning of the global financial system – that central banks are independent and free from political meddling.
Treasury Secretary Scott Bessent said on Wednesday the Trump administration was not in a rush to nominate a new chair to replace Powell, whose term as head of the bank ends in May 2026. Bessent has said the administration would likely announce a successor in December or January.
'A little excitement of Trump's visit may have been lost, given Bessent's claims that Trump has no intention of firing Powell,' said Matt Simpson, a senior market analyst at City Index in Brisbane. 'But that doesn't mean Powell is off the hook either. Trump announcing a personal visit to the Fed HQ just days after railing against Powell and the renovation feels less like a policy move and more like an intimidation tactic.'
Typically US presidents refrain from commenting on Fed policy altogether in deference to the bank's autonomy, but Trump, whose governing style blasts through political norms, has not followed that example. Since returning to office in January, Trump has attacked institutions from law firms to universities to media organizations in an effort to reshape US society in line with his vision.
He has used the same verbal sledgehammer against the Fed, pressuring Powell to cut rates and knocking him for not stimulating the economy further.
The Supreme Court in a recent opinion appeared to signal that Trump could not fire Powell other than for cause. Since then, the cost overruns at the Fed's headquarters renovation project have become a focus for the administration in its pressure campaign on the Fed chair.
Trump has said he would like the Fed to cut its benchmark interest rate to as low as 1% from the current 4.25 per cent-4.50 per cent target range to reduce government borrowing costs. This would allow the administration to finance rising deficits expected from his spending and tax-cut law. But a Fed policy rate that low is typically a sign of a country in economic trouble.
None of the Fed's 19 policymakers sees interest rates falling as low as Trump would like. Their latest projections last month showed most expected the federal funds rate to fall no lower than a 3.25 per cent-3.50 per cent range by the end of next year.
Even the most dovish policymakers forecast a fall to 2.25 per cent-2.50 per cent in the next two years.
The Fed meets next week and is expected to keep rates in the current range. Investors expect the bank to resume cutting rates in September.
As Trump increased pressure on Powell this week, the Fed chief's immediate predecessors, Ben Bernanke and Janet Yellen, said Trump's demands for 'radical' interest rate cuts and threats to fire Powell 'risk lasting and serious economic harm.'
In an opinion piece in the New York Times on Monday, they wrote, 'The Fed's credibility – its perceived willingness to make hard decisions based on data and nonpartisan analysis – is an important national asset. It is hard to acquire and easy to lose.'