Trump calls for Fed board coup, criticizes Powell for not cutting interest rates

President Donald Trump has criticized Fed Chair Jerome Powell for not cutting short-term interest rates, calling him "stubborn." Trump wants the Fed's board to take control and lower rates by 3 percentage points to boost growth and lower debt servicing costs. Trump sees no inflation risk despite the Fed's preferred measure running at 2.6%. Powell's term as chair ends in May 2026, allowing Trump to appoint his own replacement.

President Donald Trump has once again called for the Federal Reserve’s board of governors to assume control over the central bank, criticizing Fed Chair Jerome Powell for not cutting short-term interest rates. Trump, who has been vocal about his desire for lower rates, wants the Fed to reduce its benchmark rate by 3 percentage points to boost economic growth and lower debt servicing costs. The president, however, remains unconvinced about the inflation risk, despite the Fed's preferred measure running at an annual rate of 2.6% [1].

Powell has held the benchmark rate steady this year, stating that Fed officials need to assess the impact of Trump’s tariffs on inflation. The Fed’s recent decisions have drawn criticism from Trump, who has repeatedly demanded immediate and steep rate relief. The latest policy decision, made by a 9-2 vote, saw two Fed governors dissenting for the first time in more than 30 years, both of whom were appointed by Trump and agreed with his stance on monetary policy [2].

The two dissenting governors, Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller, preferred to lower the target range for the federal funds rate by one quarter of a percentage point at the July 2025 meeting. Powell, who was appointed by former President Barack Obama and later promoted by Trump, voted to hold rates steady, along with three other governors and the five Fed regional bank presidents [3].

Trump’s frustration with the Fed’s rate policy reflects his broader economic agenda, which includes the imposition of high tariffs to support domestic manufacturing. The president argues that lower interest rates would lead to stronger economic growth and lower borrowing costs for both the federal government and homebuyers. However, the risk of a large rate cut is that it could cause more money to flow into the economy than it can absorb, potentially accelerating inflation [4].

Powell’s term as Fed chair ends in May 2026, at which point Trump will have the opportunity to appoint his own replacement. The Supreme Court has suggested that Trump cannot remove Powell for policy disagreements, but the White House is investigating whether the Fed chair could be fired for cause due to cost overruns in the Fed’s $2.5 billion renovation projects [1].

The ongoing dispute between Trump and Powell is likely to continue, as both sides remain steadfast in their positions. The Fed’s decision-making process is designed to be independent of political pressures, and the recent dissenting votes underscore the internal divisions on the board. The future of monetary policy in the United States remains uncertain, as the Fed grapples with the impact of Trump’s tariffs and the broader economic outlook.

References:
[1] https://www.pbs.org/newshour/politics/trump-demands-that-federal-reserve-board-wrest-full-control-of-central-bank-from-fed-chair-powell
[2] https://www.reuters.com/world/us/trump-fed-board-should-assume-control-if-powell-wont-lower-interest-rates-2025-08-01/
[3] https://www.reuters.com/business/fed-leaves-rates-unchanged-despite-trumps-pressure-with-two-governors-dissenting-2025-07-30/
[4] https://www.scmp.com/news/world/united-states-canada/article/3320486/trump-urges-fed-reserve-board-wrest-control-central-bank-chair-powell?utm_source=rss_feed