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Trump Critiques Fed Chair Powell, Calls for Interest Rate Cuts

(Reuters) – U.S. President Donald Trump expressed strong dissatisfaction with Federal Reserve Chair Jerome Powell, stating that his dismissal “cannot come fast enough” while advocating for a reduction in interest rates.

In a post shared on his social media platform, Truth Social, Trump reiterated his call for lower rates, asserting that Powell “should have lowered interest rates, like the European Central Bank, long ago, but he should certainly lower them now.”

Currently, the Federal Reserve’s benchmark interest rate is set between 4.25% and 4.50%, a range that has remained unchanged since December 2023, following a series of rate cuts implemented in the latter part of the previous year.

These remarks from Trump followed Powell’s comments during an event at the Economic Club of Chicago, where he emphasized the Fed’s independence and its ability to set interest rates free from political influence, garnering applause from the audience of business leaders.

Trump’s criticism of Powell is part of a broader pattern, as he has at various points hinted at the possibility of wanting to remove the Fed chair, mirroring attempts to alter the composition of other independent policy-making bodies, a matter currently being adjudicated by the U.S. Supreme Court.

During his Thursday address, Powell noted that the Fed is closely monitoring the ongoing legal developments but believes the outcome will not directly affect the central bank, emphasizing the importance of its credibility in managing economic policy, which is crucial for both domestic economic stability and international markets.

Despite Trump’s calls for Powell’s removal, the Fed chair’s term is set to expire in May 2026. It remains uncertain if Trump is prepared to wait until that date or if he anticipates a ruling from the Supreme Court that might expedite Powell’s exit.

In his critique, Trump described Powell as “always too late and wrong,” labeling Powell’s prior address as “another, and typical, complete mess!”

Powell had previously warned that Trump’s tariff strategies could hinder progress toward the Fed’s goals of stable inflation and full employment, a dual objective mandated by Congress.

Powell indicated that the Fed is in a position to observe evolving economic conditions, suggesting a cautious approach regarding policy adjustments until the ramifications of Trump’s tariffs are more clearly understood and their effects on the economy become evident.

Central bank officials are characterizing this situation as an economic “shock” without historical precedent, one that complicates the dual mandate of balancing inflation and employment.

Some Federal Reserve members are concerned that job market effects could materialize quickly and are prepared to implement interest rate cuts if necessary. However, others worry that Trump’s inconsistent policy approach might destabilize inflation expectations, ultimately necessitating higher rates.

The challenge facing the Fed is unique compared to its global counterparts, as it grapples with the potential divergence from its mandated objectives.

Last year, the Fed had aligned with other central banks to reduce the U.S. benchmark rate significantly by a full percentage point during three consecutive meetings, bringing it to its current range of 4.25% to 4.5%. However, efforts to achieve the Fed’s 2% inflation target struggled in the latter months of the year, prompting a pause in rate cuts until clearer signs of easing price pressures are detected.

Since Trump took office on January 20, 2023, the outlook for the Federal Reserve has become increasingly uncertain, contributing to revised forecasts in other nations as they pursued their own paths toward easing interest rates.

(Reporting by Angela Christy and Gursimran Kaur in Bengaluru; Editing by Chizu Nomiyama)

Source
www.yahoo.com