The Fed Chairman’s Termination isn’t Too Late or Wrong: President Trump’s Counterattack on the European Central Bank and the Fed
In a social media post, Trump complained that Powell is “always TOO LATE AND WRONG,” and he insisted the Fed chairman’s “termination cannot come fast enough!”
The president was evidently frustrated that the European Central Bank was preparing to lower interest rates for the seventh time, while the Federal Reserve is in a holding pattern. Of course, European leaders have not imposed triple-digit tariffs which threaten to rekindle inflation.
Powell said that tariffs are likely to cause at least a temporary increase in inflation. “The inflationary effects could also be more persistent.”
Trump called Powell’s report a complete mess and argued that oil prices are down and groceries are down.
While oil prices have fallen, grocery prices increased last month according to the latest inflation report from the Labor Department. The effects of bird flu caused an egg price increase between February and March.
The disagreement between the president and the Fed chair has lasted for years, despite the fact that Trump was nominated for the post in his first term.
Powell tried to avoid talking about the president, but was often evasive about Trump’s commentary. He is adamant that he will serve the rest of his term, which ends in May next year.
Powell insists that the president doesn’t have the power to fire him for any reason other than bad behavior. The Supreme Court’s current precedent supports that view. But the White House has signaled a willingness to test that standard, firing board members of other independent agencies.
Lawmakers in both parties have defended the Fed’s ability to set interest rates, according to Powell. But that doesn’t mean there isn’t grumbling.
At an event at the Economic Club of Chicago on Wednesday, Mr. Powell made clear that it was the Fed’s “obligation” to ensure that “a one-time increase in the price level does not become an ongoing inflation problem” even as he reiterated his warnings about the prospects of slower growth. He also stressed that the Fed could afford to be patient on taking further action on interest rates until it had more clarity about the outlook.
Mr. Trump soon reversed course and paused many of his tariffs for 90 days, citing a “queasy” bond market. Even as Mr. Trump exempted an array of consumer electronics from tariffs, he still raised tariffs on Chinese imports to more than 100 percent. The whiplash has kept financial markets on edge and has done little to alleviate Mr. Powell’s concerns about the economic outlook.
For months, Mr. Trump has privately fretted about the prospect of a Great Depression-scale event happening on his watch — a scenario he shorthands in conversations as “1929.” But the events of the past two weeks so alarmed some of Mr. Trump’s closest advisers, including his Treasury secretary, Scott Bessent, that Mr. Trump himself seems to have absorbed how close they came to a financial meltdown.