On Friday evening, President Donald Trump posted a long and angry message on social media Truth Social, in which he made the harshest criticisms to date aimed at Federal Reserve Chairman Jerome Powell. This is Trump's latest move since he returned to the White House five months ago.
Trump: 'Powell Should Not Have Been Appointed'
Trump believes that appointing Powell as head of the Fed was a big mistake. He said that Powell has caused the U.S. to lose $1 trillion each year by maintaining interest rates that are too high, calling Powell a 'fool' and someone who 'clearly hates Trump.'
'I have tried being gentle, neutral, and tough with him. But only when I am tough does he pay attention. He is a fool; he should not have been given this position,' Trump wrote.
He also stated that he should have listened to different advice instead of choosing Powell, and criticized President Biden for retaining Powell after taking office.
Demand the Fed Cut Interest Rates Immediately to 1–2%
Trump argues that now is the ideal time for the Fed to cut interest rates to 1–2%. He stated that this would save the U.S. trillions of dollars in interest, especially as the economy is recovering strongly, factories are reopening, and tax revenue from tariffs is increasing.
'If he is worried about inflation or any other issues, then just cut rates now so we can save money, then raise them again later if needed. But I doubt that will be necessary,' Trump emphasized.
He concluded his post with an implied threat that Powell could be fired, while calling on the Fed Board to overcome Powell’s personal will. 'Maybe I will change my mind about firing him? But anyway, his term is almost up!' Afterwards, Trump posted a custom comparison image below to add more drama:
Meanwhile, the Fed is still divided
On the same day, Chairman Powell along with other Fed officials spoke out after the decision to maintain interest rates this week at 4.25%–4.5%. The Fed is currently deeply divided: one half wants to cut interest rates this year, while the other half does not.
Christopher Waller, a Fed Governor, stated on CNBC that inflation is no longer the main concern, and the Fed should consider cutting interest rates as early as July.
'Data from the past few months shows that the inflation trend is quite stable,' Waller said. He also believes that new tariffs will not cause significant inflation and should not be a major factor in monetary policy.
Waller warned against waiting too long, especially as the labor market is showing signs of strain, such as a high unemployment rate among new graduates.
Mary Daly Calls for Caution
In contrast to Waller, Mary Daly – President of the San Francisco Fed – expressed a more cautious view. She believes that cutting interest rates may be appropriate in the fall but should not be done in July.
'Cutting interest rates in the fall would make more sense, unless the labor market deteriorates faster than expected,' Daly said, while warning about the risk of inflation from tariffs, although she acknowledged that many businesses may bear the burden rather than passing costs onto consumers.
Will the Fed Cut or Maintain Rates?
The latest forecast from the Fed shows a clear division: 8 officials believe interest rates should be cut twice this year, while the remaining 7 do not want any adjustments at all. Supporters of the cuts argue that the appropriate time could be September or December.
Meanwhile, Trump seems to want to act immediately, despite warnings from experts.
Comments
Trump is putting the Fed in a difficult position by calling for a strong interest rate cut while the central bank is still divided internally. If inflation continues to cool and the labor market worsens, Trump’s demands could add more pressure on the Fed in upcoming meetings. However, firing Powell – if it happens – would certainly cause a shock in the global financial community.