In the global economic landscape, every move of the Federal Reserve can have far-reaching consequences. Recently, a shocking piece of news has erupted in the financial sector — Federal Reserve Chairman Powell has resigned due to issues related to the renovation of the Federal Reserve building. This event is like a bombshell, instantly becoming the focus of the global economic field, and it is further complicated by President Trump's strong demand for the Federal Reserve to cut interest rates by three percentage points, making the entire financial situation even more perplexing.
The origin of the matter is the renovation project of the Federal Reserve building. Originally estimated at a budget of $1.5 billion, the renovation costs ultimately skyrocketed to $2.6 billion. Such a massive cost overrun has sparked strong attention and dissatisfaction from various parties, with Trump being the first to express his anger. In his view, this renovation led by Powell is a complete waste of taxpayer money. Trump bluntly stated that under the current economic situation, the Federal Reserve should devote more energy to stabilizing the economy and promoting employment, rather than spending huge sums on such extravagant renovations. The White House's official letter clearly pointed out that this renovation project not only exceeded the budget by $700 million but also included numerous luxurious facilities, with office space far exceeding the standard, which undoubtedly amounts to a waste of public resources. In fact, this is not the first renovation of the Federal Reserve headquarters; a large-scale renovation took place from 1999 to 2003, and now investing such a huge amount of money again inevitably invites criticism of extravagance.
In the face of overwhelming criticism, Powell also feels immense pressure. Although he explained that the cost overruns were due to many unforeseen issues encountered during the renovation, such as the asbestos content inside the building being far beyond expectations, requiring more funds for safe handling; the underground soil containing toxic pollutants, necessitating extra funds for cleanup; and the groundwater level being higher than estimated, which posed great difficulties for construction and increased costs. However, these explanations seem unable to completely quell external doubts, especially under the continued pressure from the Trump administration, Powell ultimately chose to resign.
Meanwhile, Trump's dissatisfaction with the Federal Reserve's interest rate policy has reached its peak. He strongly demands that the Federal Reserve cut interest rates by three percentage points, believing that only in this way can the further growth of the U.S. economy be effectively stimulated. In Trump's view, while the current U.S. economy maintains a certain development trend, it still faces numerous challenges. Lowering interest rates can reduce corporate financing costs, encourage companies to expand investment and production, thereby creating more job opportunities and promoting economic prosperity. Additionally, lower interest rates can also alleviate the government's debt burden, allowing the U.S. to save a significant amount of money when repaying national debt.
However, Trump's demand may trigger a chain reaction in global financial markets. If the Federal Reserve significantly lowers interest rates, it is highly likely to lead to a massive increase in liquidity worldwide. Other countries may follow suit to maintain their own economic competitiveness and stability, resulting in a substantial increase in global money supply. This could not only trigger global inflation but also further increase instability in the global financial markets, bringing enormous uncertainty to the development of the world economy.
Looking back at the history of the Federal Reserve, the term of a governor is usually 14 years, but since 2000, as many as 15 governors have resigned early. This phenomenon is influenced by factors such as changes in the economic situation and policy disagreements, and it also reflects the severe test faced by the internal decision-making mechanism and personnel stability of the Federal Reserve in the face of a complex and changing economic environment and pressures from various parties. Powell's resignation due to renovation issues, along with Trump's strong demands on interest rates, undoubtedly places the Federal Reserve and even the global economy at a new crossroads, and everyone is watching to see which direction it will take in the future.
