“A looser” and “Mr Too Late”. It's a very hard attack and in some ways unprecedented that of Donald Trump towards the chairman of the Federal Reserve Jerome Powell. After the pressure of the past weeks, the American president returns to rail against the number one of the American central bank. His fault? Not having (yet) cut the interest rates. Words that had immediate repercussions on the markets: while the European stock exchanges were closed for the holiday, Wall Street ended up once again in the red on Monday, weighed down by the fear that the independence of the Fed is increasingly at risk by the day.
Trump's Attack on Powell
“Many are calling for preemptive rate cuts,” Donald Trump wrote in a post on Truth. “With energy costs falling sharply, food prices (including Biden’s egg disaster!) substantially lower, and most other things falling, inflation is virtually zero,” the US president continued. “With these costs falling so sharply, just as I predicted, there can be almost no inflation, but there can be a SLOWDOWN of the economy unless Mr. Too Late, a big loser, don’t lower interest rates, NOW. Europe has already cut rates seven times. Powell has always been Too Late, except during the election season when he lowered rates to help a sleepy Joe Biden, then Kamala, get elected. How did that work?”
Trump's pressure on Powell is thus becoming more intense day by day. That of Monday it is not in fact an isolated attack, on the contrary. Last Thursday, answering journalists' questions during the bilateral meeting with Prime Minister Giorgia Meloni on Thursday, referring to the number one of the Fed, Trump had said "I'm not happy with him", affirming that he could fire him if he wanted.
Even earlier, again on Truth, the White House tenant had invited Powell to lower the Fed's short-term interest rate: “Powell's firing can't come fast enough!” he added.
Powell was initially appointed by Trump in 2017 and was reappointed for another four years in 2022, when Joe Biden was president. His term as head of the Federal Reserve expires in May 2026.
In a press conference in November, Powell said he would not resign if Trump asked him to do so, and on Wednesday he reiterated that “our independence is a matter of law.” He then added: "We are not removable except for work reasons. We have very long mandates, apparently infinite."
Why Powell Isn't Cutting Rates
Jerome Powell is currently in a very delicate position, which many commentators have not hesitated to define as “the nightmare of every central bank chairman”.
The reason? After raising rates between 2022 and 2023 to tame the Covid-triggered inflation surge, prices have actually fallen, from 9,1% in 2022 to 2,4% last month. In the meantime, The Fed has cut rates three times in 2024. Since then, however, Powell and most other Fed policymakers have stressed that they are holding rates held steady due to uncertainty created by tariffs wanted by Trump. In fact, tariffs could push prices up again, which is why rates have not been cut further, although, if growth slows or the US ends up in recession (again due to tariffs), the Fed could decide to take a cut to give the economy a boost. Powell is therefore at a crossroads and for the moment has chosen the path of caution. Whether Trump likes it or not (no).
