Jerome Powell, the Federal Reserve chair, seems to be stuck in a one-sided beef with presidential candidate Donald Trump.
The former president is convinced that Powell and the Fed are using their power to mess with his chances in the election.
Last week, the Fed’s Federal Open Market Committee (FOMC) made a decision to lower the baseline interest rate, which, unsurprisingly, dragged Powell into the political spotlight again.
Trump genuinely believes that the Fed chair is a political tool, saying that any economic decision would be a ploy to benefit Kamala Harris, his Democratic rival.
He and his running mate, JD Vance, think the Fed should be more “democratic,” proposing a closer relationship between the FOMC and politicians.
Wall Street was expecting a 25-basis-point cut, so this was twice what the markets anticipated. The GOP immediately pushed back.
Trump took the opportunity to throw shade at Powell, calling the cut either a sign of a weak economy.
“The economy would be very bad, or they’re playing politics, one or the other.”
Alabama Senator Tommy Tuberville shared Trump’s sentiment, saying the Fed’s decision was “shamelessly political.”
While Powell insists the Fed is apolitical, it’s hard for anyone to ignore the timing of this cut, especially with the election around the corner.
Powell, a registered Republican himself, said in a press conference:
“This is my fourth presidential election at the Fed and it’s always the same. We do what we think is right for the people we serve.”
But that hasn’t stopped the accusations.
Trump’s problem with Powell goes deeper. He nominated him for the role back in 2018. At the time, Trump praised Powell’s leadership, saying he had the “wisdom and leadership to guide our economy.”
But things soured quickly. Trump’s administration has been asking for changes at the Fed.
Earlier this year, The Wall Street Journal reported that Trump’s team was planning to restructure the Fed to give Trump more control over interest-rate decisions.
This idea was later walked back, but the intention was clear. Trump wants to control the Fed, and Powell is standing in his way.
He said, “They’ll do the rate cut and all the political stuff tomorrow,” and added that if he wins the election, “we’re going to get interest rates down.”
Powell, on the other hand, has maintained that the Fed is doing what’s best for the economy, not what’s best for any political party.
Trump has been framing Powell as an ally to the Biden administration, and other GOP members are following suit.
This 50-basis-point means borrowing costs are lower, which could help boost the economy in the short term. But it also means the Fed is acknowledging that the economy might be in trouble.
Powell has said that the cut is meant to help support the labor market and keep inflation in check.
He’s pointed out that the Fed’s decisions take time to have an impact. “The things that we do really affect economic conditions for the most part with a lag,” Powell said.
Some Democrats are frustrated, too. Elizabeth Warren, a longtime critic of the Fed, said on social media:
“This cut in interest rates is yet another acknowledgement that Powell waited too long to reduce rates.”
She added that lower rates mean relief for consumers and aspiring homeowners, and she wants to see more cuts.
