The Federal Reserve’s expected decision on Wednesday to cut interest rates again will spark new questions about whether Powell, its chairman, is caving to intense public pressure by Trump. While Powell strongly rejects that notion, the president’s policies have clearly forced the central bank’s hand.
President Donald Trump rails against Federal Reserve Chairman Jerome Powell, claiming that “people are VERY disappointed in” the central bank leader. Trump’s reaction comes a day after the Fed’s lowered interest rates for the third time this year.
I expect the president believes his haranguing moved Powell in 2019; so will continue to beat up Powell.
I expect that Powell deeply resents the humiliation and market perception from 2019 and will become even more intransigent in 2025 as Trump becomes more insulting toward him.
Federal Reserve chairs leave a legacy that is studied for many years. Powell is in his last year as Fed chair. He has done an excellent job at reversing inflation while bringing the economy into a soft landing. There is no way that Powell would jeopardize his reputation and legacy by caving under political pressure and personal insults. The harsher the bullying the stronger Powell’s reputation will be.
Wendy
There are not enough good reasons to meaningfully drop interest rates right now. Maybe 1/4 point next month, but that isn’t particularly meaningful. The main issue is that dropping short term fed funds rates doesn’t ensure that longer term rates, like the 10-year drop. And it’s the 10-year that needs to drop, not the short-term rates, to see lower mortgage rates … to stimulate housing somewhat, and to deliver some small amount of relief to CRE loans that are either in trouble, or have had their troubles pushed into the future using various techniques.
But you can bet on one thing. If there’s any indication of recession and/or increased unemployment, the Fed will drop rates very quickly. Even between regular meetings if necessary.