Those escalating war cries coming out of D.C. may sound like the nepo baby/love child of “Celebrity Apprentice” and “Mean Girls” with a drop of Shakespearean drama in its DNA.
Not.
It’s just the latest Beltway chatter sprouting from the White House to an independent government agency and its head that traditionally stays clear of politics.
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And while slurs, threats, and mistruths abound, there’s little indication that escalating efforts by President Donald Trump and his allies will be able to force Federal Reserve Chair Jerome H. Powell to cut interest rates later this month.
Related: Fed official voices blunt 3-word message on Fed rate cuts
Or resign so the president can install a chair of his choice in the role who would whittle the interest rates that are eating up your wallet.
Trump has revealed his latest strategy regarding Powell’s future.
Economists say it’s too soon for a rate cut
American consumers, businesses, and investors in the post-pandemic economy would welcome an interest rate cut to cool down the high costs of home mortgages, credit cards, and other loans.
Many economists and market watchers are saying it’s too soon for the first 2025 rate cut.
Data, not politics, historically drives the Fed’s policymaking panel – the Federal Open Market Committee – to follow its legal dual mandate to keep inflation low and unemployment stable amidst GDP growth.
It’s a tricky balancing act.
The goal: guide the economy away from recession and stagflation fears.
Rising prices can lead to decreases in employment rates and higher job numbers lead to increased inflation.
Related: Tariff uncertainty resets inflation, July interest rate cut bets
The FOMC decided unanimously last month to hold the Federal Funds Rate steady at 4.25% – 4.50%, despite describing the U.S. economy as “stable.”
The reason: expected inflation from Trump’s tariffs creeping up this summer, then through the supply chain into homes, factories, and retail outlets later this year.
The Fed Funds rate is tied to the cost of borrowing money.
More Federal Reserve:
- Fed interest rate cut decision resets forecasts for the rest of this year
- Federal Reserve prepares strong message on long-term interest rates
- Fed official revamps interest-rate cut forecast for this year
The Fed’s prudent “wait-and-see” approach has the White House enraged.
Trump has been very vocal that the politically independent central bank needs to slash the funds rate immediately by over 3%.
This is to unleash what the president says is trillions of dollars in pent-up economic demand amidst somewhat stable inflation and job rates.
Trump is not expected to reappoint Powell.
Image source: Gunes/Anadolu via Getty Images
Trump reveals what his plans are for Powell
Powell’s term as chair is up in May, and he has said he won’t resign.
Trump has threatened to install a “shadow’’ replacement Federal Reserve chair who will lead his charge to slash interest rates.
Potential chair replacements whose names are making the rounds include:
- Treasury Secretary Scott Bessent
- Kevin Hassett, National Economic Council Director.
- Kevin Warsh, a former Federal Reserve governor.
- Christopher Waller, a current Federal Reserve governor.
Warsh, Waller, and Federal Reserve Gov. Michelle Bowman have all said the FOMC should consider an interest rate cut beginning in July because expected tariff inflation spikes will not impact prices in the long run.
Waller and Bowman both said a rate cut should be predicated upon June inflation and jobs reports.
Waller, a Trump appointee, as is Powell, defended this position on June 10, saying data shows historically that tariff inflation is transitory.
“It’s not political,’’ he said of his position.
Trump told CNN on July 11 that he would not try to fire Powell.
“No, I think he’s doing a terrible job,’’ the president said.
When pressed if he would remove Powell, Trump replied: “No.”
Powell’s response to the White House attacks has been that he is focused on doing his job per the outline of the central bank’s dual mandate.
The U.S. Supreme Court, in a May ruling, alluded that it would be illegal for the Trump administration to fire Powell.
Market watchers have indicated that any effort to remove Powell would likely result in a sell-off.
Expect the White House “shock and awe ” approach to continue, especially as the next FOMC meeting date of July 29-30 draws closer.
Related: Federal Reserve chair sends strong message on July interest rate cut