Trump Unleashes Scathing Attack on Powell Over Fed Policy

One day after the Federal Reserve held interest rates steady, President Donald Trump escalated his criticism of Fed Chairman Jerome Powell. In a social media post, Trump called Powell “too angry, too stupid, and too political,” and unworthy of his position. Trump stated, “He [Powell] is costing our Country TRILLIONS of DOLLARS, and is also making a Building Renovation that is the most incompetent or corrupt in history! In other words, ‘Mr. Late’ is a complete disaster, and our Country is paying the price!”

Disagreements Over Monetary Policy and Inflation

Trump’s renewed attack comes after the Fed decided to hold interest rates unchanged for the fifth consecutive meeting, defying Trump's repeated calls for rate cuts. At the meeting, two Fed governors dissented, arguing for a 25-basis-point rate cut, marking the first time since 1993 that two Fed governors have dissented in such a way at a policy meeting. Powell did not alter his stance at the press conference, reiterating the need for more time to assess the impact of Trump’s tariffs on inflation and the economy, saying there was a “long way to go” to figure that out and that “you have to look at this as still being in the very early stages.” He also declined to say whether a rate cut would be considered at the Fed’s next meeting in September and made it clear that inflation remained a concern as the Fed balanced its dual mandate of stable prices and maximum employment, “Ultimately, there is no question that we will do what is necessary to control inflation.” A new inflation data release on Thursday showed that U.S. consumer prices rose faster than expected in June, and the inflation rate remained above the Fed’s 2% target. The “core” personal consumption expenditures (PCE) index, which excludes food and energy costs and is closely watched by the Fed, rose 2.8% year-over-year, higher than economists’ expectations of 2.7%, and also higher than May’s 2.7%.

Market Expectations and Potential Impact

Traders have lowered their bets on a September rate cut, reducing the probability to around 40%. Trump had told reporters before the rate decision announcement that he did expect a rate cut at the next meeting, saying, “I heard they were going to do that in September.” The decision to hold rates steady is likely to exacerbate tensions between the Fed and Trump, who in recent weeks has also questioned the chairman's management of the institution over the Fed's $2.5 billion headquarters renovation project. Last week, Trump downplayed his dissatisfaction with the Fed chairman while visiting the construction project, saying when asked about firing Powell: “That would be a big move, I just don’t think it’s necessary.” When asked last Thursday what might prompt him to take back his weeks-long barrage of criticism of Powell, Trump said, “I’d like to see him lower rates,” and then patted Powell on the back. At the press conference, Powell declined to comment in detail on Trump's criticism. He said Trump's recent visit was an honor and defended the central bank’s independence. He said whether rates would be cut this fall would depend on “the totality of the evidence,” part of the message he conveyed that inflation remained above target and his goal was to ensure short-term price increases from tariffs did not become a long-term problem. “Between now and the next meeting, we will be watching a lot of data,” Powell said. “We’ll see where that takes us.”

Analyzing the Global Economic Situation

Recent developments point to a state of uncertainty regarding the trajectory of the global economy. While US inflation data remains above target, the Federal Reserve faces political pressure to cut interest rates. Investors should closely monitor these developments to assess potential risks and opportunities. The performance of certain sectors, such as technology and consumer discretionary, might be more sensitive to these shifts.