- President Trump again pressed Fed Chair Jerome Powell to slash interest rates to 1%, during a tense meeting where he also mocked Powell over costly Fed building renovations.
- Trump has hinted at firing Powell, using the renovation costs as a potential legal pretext, though critics warn such a move could destabilize markets.
- Experts caution that Trump’s proposed rate cuts could backfire, triggering higher real-world borrowing costs and inflation instead of boosting economic growth.
President Donald Trump had a tense exchange with Federal Reserve Chair Jerome Powell on Thursday, again urging the central banker to lower interest rates. During a meeting marked by awkward moments, Trump quipped to reporters that the only thing Powell could say to ease his criticism would be: “I’d love him to lower interest rates!” while patting Powell on the back.
Dispute Over Renovation Costs and Legal Pretexts
The confrontation comes as Trump continues to float the possibility of firing Powell. After facing pushback over rate-cut demands, Trump has shifted his criticism toward what he calls costly renovations at the Fed’s Washington, D.C., headquarters. Some analysts suggest this narrative could serve as a legal angle for removing Powell, should Trump decide to move forward.
Trump’s Target vs. Economic Warnings
Currently, U.S. interest rates hover around 4.33%. Trump wants them cut drastically to 1%, arguing that Powell’s policies hurt economic growth. He has also accused Powell of being politically biased, noting the rate cuts that occurred during President Biden’s administration.
However, experts warn that forcing rate cuts could spark unintended consequences, such as spiking real-world borrowing costs and fueling inflation—precisely what the Fed has tried to avoid.
