Trump hits ‘too late’ Jerome Powell as Federal Reserve keeps interest rates steady despite two board dissenters
President Donald Trump continued his attacks on Federal Reserve Board of Governors chair Jerome Powell as the American central bank again rebuffed his demand for lower interest rates, keeping them steady for at least another month.
Speaking in the Roosevelt Room during a bill signing ceremony, the president hit out at Powell, who he has blamed for decisions made by the bank’s powerful Open Markets Committee, using the derisive nickname he assigned him when he began to demand lower rates months earlier.
“We should be the lowest interest rate. And we’re not. We’re … number 38 because of the Fed. It’s all because of the Fed. He’s done a bad job. Now. He’s got a meeting today, but I call him too late. You know, he’s always too late, even if he does it today, probably won’t. I hear they’re going to do it in September, not today,” Trump said.
In a statement moments after Trump spoke, the bank justified the decision to keep rates steady by noting that while employment and economic growth remain steady after Trump’s first half-year in office, the rate of inflation remains “somewhat elevated.”
Powell offered some further explanation during a press conference announcing the move at which he stressed that Trump’s “reciprocal tariffs” have led to some increased inflation around goods, the long-term economic effects of tariffs remain to be seen.
“Recent indicators suggest growth of economic activity has moderated,” Powell said. “The moderation in growth largely reflects a slowdown in consumer spending.”
The rate-setting committee’s decision — usually offered unanimously — came with the first dissenting votes in over three decades as a pair of members, Federal Reserve Vice Chair of Supervision Michelle Bowman and Board of Governors member Christopher Waller, voted to lower rates in what appeared to be a deliberate attempt to curry favor with Trump.
With Powell’s term set to expire next year, both Bowman and Waller are understood to be among those Trump is considering putting forward as his successor.
Despite the rare dissenting votes, Powell described the session as a “good meeting all around the table.”
“People thought carefully about this and put their positions out there,” he said.
Powell added that the “majority of the committee” considered the current rate of inflation “a bit above target” and said the data called for “modestly restrictive [interest rates] in [his] way of thinking.”
The Fed’s decision to keep interest rates stable comes the same day that the Bureau of Economic Analysis released its report showing that GDP grew by 3 percent in the last economic quarter between April and June. The report also revealed that while consumer spending increased, imports decreased, likely an effect of Trump’s announcement about tariffs and his subsequent pause. In addition, the BEA report also showed that investment declined.
This came after the previous quarter where GDP actually shrank, which Trump blamed on his predecessor Joe Biden.
The decision comes after weeks of bullying and browbeating of Powell by Trump and his allies, including top officials at the Office of Management and Budget and the Federal Housing Finance Administration, who have seized on long-running renovations at the Fed’s headquarters as a possible pretext under which Trump would fire Powell, who he appointed to lead the Fed during his first term.
Trump and his allies have said the $2.5 billion renovation of the Fed headquarters and a neighboring building reflects an institution run amok — a belief they had hoped to verify in during a tour of the construction site last week, during which Trump made a further attempt to further ratchet up pressure on Powell by confronting him over alleged wasteful cost overruns.
Trump’s attacks have put the Fed, a historically independent institution, under a harsh spotlight. Undermining its independence could reduce the Fed’s ability to calm financial markets and stabilize the U.S. economy.
The president has made no secret of his distaste for Powell, whom he nominated to lead the Federal Reserve in 2017, primarily because of Powell’s refusal to lower interest rates, particularly in light of Trump’s decision to levy tariffs.
Earlier this week, Trump announced a trade deal with the European Union that would also include a 15 percent tariff on European goods coming into the United States. He also announced a “massive” trade deal with Japan that would slash tariffs on automobiles from 25 to 15 percent.
Powell has said that the central bank needs time to see what effects tariffs will have on inflation and employment before making a determination on interest rates. This has prompted Trump to call Powell a “stupid person.”
The president can do little to remove Powell. Biden re-nominated Powell for another five-year term in 2021 based on his steady leadership during the 2020 COVID-19 pandemic, and his term would expire in May. Federal statute says the president can only remove Powell “for cause.”
Powell responded to a question from a reporter about Trump’s criticisms of him.
“I think that an independent central bank has been an institutional arrangement that has served the public well, and as long as it serves the public well it should continue and be respected,” he said. “What it gives us and other central banks, what it gives you the ability to make these very challenging decisions in ways that are focused on the data and the evolving outlook and the balance of risks, and all the things that we talk about, and not political factors.”
Powell warned that politicizing the Federal Reserve could lead to using interests to influence elections, which he said he opposed.
The Federal Reserve’s announcement marks a halfway point for a week full of economic news. On Thursday, a federal court will hear oral arguments on the tariffs while on Friday, the tariffs are expected to resume and the Bureau of Labor Statistics will release its latest jobs report for the month of July.
