Trump Steps Up Pressure on Powell to Lower Interest Rates

Strategic Insights -

President Trump has repeatedly attacked Jerome H. Powell, chair of the Federal Reserve, for resisting his demands for lower interest rates. Trump's criticism intensified on Monday, when he accused Powell of costing the country "a fortune" and demanded that he cut interest rates "by a lot." Trump's attacks have been accompanied by a threat to fire Powell as chair and potentially replace him before his term expires in May.

The criticism comes as Republicans push to pass a sweeping tax and spending bill that could raise the federal deficit sharply, forcing the government to allocate more money for interest payments on the debt. Trump has called for a 2.5-percentage-point reduction in interest rates, far below the current level of 4.25-4.5% set since January.

Powell has maintained a "wait and see" approach on further interest rate cuts, amid uncertainty about how the economy will respond to Trump's policies, including tariffs. Trump has taken issue with other countries continuing to lower interest rates, claiming that Powell's reluctance to do so has cost the US "a fortune."

Key Takeaways:

  • President Trump has repeatedly attacked Jerome H. Powell, chair of the Federal Reserve, for resisting his demands for lower interest rates
  • Trump has threatened to fire Powell as chair and potentially replace him before his term expires in May
  • The criticism comes as Republicans push to pass a sweeping tax and spending bill that could raise the federal deficit sharply
  • Trump has called for a 2.5-percentage-point reduction in interest rates, far below the current level of 4.25-4.5% set since January
  • Powell has maintained a "wait and see" approach on further interest rate cuts, amid uncertainty about how the economy will respond to Trump's policies
  • Trump has pointed to other countries, including the European Central Bank and the Bank of England, as examples he claims are cutting interest rates effectively
  • Christine Lagarde, president of the European Central Bank, recognized Powell as a "courageous central banker" at a conference in Sintra, Portugal

Statistics:

  • The federal deficit could increase sharply with the passing of the Republican tax and spending bill
  • Trump's demand for a 2.5-percentage-point reduction in interest rates would be a far lower rate than the current level of 4.25-4.5%
  • The European Central Bank has cut interest rates eight times over the past year
  • The Bank of England has cut interest rates but kept borrowing costs steady at its most recent meeting in June

Sources:

  • The New York Times - no specific publication date mentioned
  • PHOTO: Karoline Leavitt, the White House press secretary, with a note that accuses Jerome H. Powell, the Federal Reserve chair, of costing the U.S. "a fortune." (PHOTOGRAPH BY DOUG MILLS/THE NEW YORK TIMES)
  • Eshe Nelson contributed reporting.