In a dramatic escalation of tensions between the White House and the Federal Reserve, President Donald Trump lashed out at Fed Chair Jerome Powell following the central bank's decision to keep interest rates steady.
The Federal Reserve announced on Wednesday that it would maintain its benchmark interest rate in the range of 4.25% to 4.5%, breaking a cycle of rate cuts that began in September. This decision came despite Trump's public calls for immediate rate reductions.
In response to the Fed's decision, Trump took to social media, accusing Powell and the central bank of mismanaging the economy. "Jay Powell and the Fed failed to stop the problem they created with Inflation," Trump posted. He further criticized the Fed's approach to bank regulation, stating, "The Fed has done a terrible job on Bank Regulation".
Trump had previously declared, "I will insist that interest rates decrease immediately," during a virtual appearance at the World Economic Forum in Davos. He added, "I understand interest rates far better than they do".
In contrast, Powell maintained a measured stance during his press conference. When asked about Trump's comments, Powell stated, "I will not provide any response or commentary regarding the president's comments. It is not suitable for me to do so". He emphasized the Fed's independence, saying, "The public should have confidence that we will persist in our duties as we have always done, concentrating on utilizing our tools to achieve our objectives".
Powell also addressed the uncertainty surrounding Trump's economic policies, particularly regarding tariffs and immigration. "We don't know what will happen with tariffs, with immigration, with fiscal policy, and with regulatory policy," Powell remarked. He added, "I think we need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications on the economy will be".
This exchange highlights the ongoing conflict between Trump's desire for lower interest rates and the Fed's cautious approach to monetary policy. While Trump believes rate cuts are necessary for economic growth, Powell and the Fed are focused on maintaining price stability and full employment in the face of uncertain economic conditions.
The clash between the President and the Federal Reserve Chair underscores the delicate balance between political pressures and the central bank's mandate for independent decision-making in monetary policy.