Powell Defends Fed's Latest Rate Decision as Trump Alleges It Was Based On Political Motives

The Federal Reserve's decision on Wednesday to cut interest rates by 50 basis points is seen as a further step in easing the monetary cycle. This unusual stance has not only caused ripples in the market but also impacted the U.S. election.

Trump stated on Wednesday that the Fed's rate cut indicates that the U.S. economy is in trouble, and another possibility is that the institution is playing politics.

On Thursday, Trump once again lashed out, condemning the Fed's 50 basis point rate cut as a political move, as most market participants expected only a 25 basis point cut, which would have been a wise choice. He claimed that the Fed was doing this to keep someone in power, but it would not work because inflation in the U.S. was too severe.

He continued to point out that the Fed had made the wrong decision, either too early or too late. It did not raise rates when inflation was severe and now it is cutting rates significantly when inflation has not subsided.

Previously, Trump had threatened that if elected President, he would intervene in the affairs of the Federal Reserve and claimed that he would not allow Powell to continue as the Fed Chairman. Generally speaking, the Federal Reserve, as an independent monetary policy-making body, is not subject to the jurisdiction of the U.S. government.

The Fed's action on Wednesday did indeed surprise many. Matthew Rowe, Head of Portfolio Management and Cross-Asset Strategy at Nomura Asset Management, noted that many market participants see this as a radical move, and the average market person cannot accept a 50 basis point rate cut. The market wants to know why the Fed is so fearful.

Analysts speculate that the Fed's biggest concern at present is that the labor market is becoming too weak. This means that after the initial optimism, the market will soon realize that adverse factors are coming and will drag down the performance of the entire market.

Of course, there is another interpretation of the Fed's actions, which is the political factor mentioned by Trump. Trump has repeatedly criticized during his campaign that the Fed has violated its principle of independence and has been influenced by partisan positions when making monetary policy.

However, Powell emphasized that he has been elected the Fed Chairman for the fourth time, and his work goals have always been consistent. The decisions he makes are based on the interests of American consumers, without considering any other factors.

The White House stated that lowering interest rates is not a victory, but it is a signal of progress, indicating that the U.S. has entered a new phase of economic recovery.

With less than 50 days left until the decisive U.S. election, any movement on economic issues could change voter attitudes. Both Harris and Trump are positioning themselves as the best candidates to maintain the healthy development of the U.S. economy, but their propaganda now seems insufficient to truly convince people.