President Trump Accuses Fed Chairman of Keeping Interest Rates ‘Artificially High’

Source: YouTube

President Donald Trump resumed his scathing public attacks on Federal Reserve Chairman Jerome Powell, accusing him of keeping interest rates “artificially high” and hurting the economy. Trump made the latest remarks during an appearance on Fox News, repeating long‑standing grievances about the Fed chairman’s leadership. Despite the central bank’s official independence, the president continues to demand drastic rate cuts. Currently, the federal funds rate stands between 4.25% and 4.5%. Trump insists borrowing costs should be “less than half” that level, calling Powell a “stubborn mule” and accusing him of undermining growth.

Trump’s Rate War Tied to Debt and Tax Plans

The President favored low interest rates throughout his presidency. But the current push reflects more than just general economic philosophy. His administration is advancing an ambitious tax cut plan that requires issuing large amounts of new government debt.

Elevated rates drive up the cost of that debt, limiting the plan’s financial feasibility. Trump argues rate cuts would immediately lower government borrowing costs while boosting consumer and business spending. Treasury Secretary Scott Bessent reinforced that message last week, signaling Trump could name a new Fed chair by October. Powell’s current term runs through May, but Trump has floated using a “shadow chair” strategy to influence policy sooner.

What Happens if the Fed Chairman Agrees to Cut Rates Right Now?

Economists remain divided on the potential fallout of an immediate rate cut. Lower borrowing costs would likely ease the government’s debt burden. It could also encourage consumer loans, mortgage activity, and corporate investment. However, inflation risks persist. Many analysts warn that Trump’s proposed tax cuts and continued global trade uncertainty could trigger price spikes. Cutting rates prematurely may fuel inflation, weaken the dollar, and reduce the Fed’s ability to respond to future crises.

Others believe the economy can absorb modest rate cuts, given recent slowdowns in hiring and consumer spending. But aggressive reductions, particularly if seen as politically motivated, could erode confidence in the Federal Reserve’s independence.

Independence Versus Political Pressure at the Fed

The Fed under Powell has resisted political demands to cut rates. Officials maintain that inflation risks remain, particularly after Trump’s aggressive trade policies and tax reforms. The central bank’s leaders emphasize that monetary policy should follow economic data, not presidential preference. Despite that stance, the Fed is showing signs of internal disagreement among its officers. Two Trump‑aligned governors recently endorsed cutting rates, fueling speculation of a policy shift. Meanwhile, the President appears unwilling to wait, signaling deep frustration with the Fed chairman’s independence.

Uncertainty Over Powell’s Future and the Fed’s Stability

The Supreme Court recently clarified that Trump cannot directly fire Powell, though the president can influence upcoming appointments. Even if Powell steps down as chair, his term as a Fed governor extends to 2032. Markets have reacted sharply to the administration’s rhetoric, with bond yields and investor expectations swinging based on Trump’s threats and criticisms.

As Trump weighs potential replacements, uncertainty around the Fed’s future direction remains high. The fight over rates has become central to broader debates on central bank independence and economic management.

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