Trump Calls for Fed 'Takeover' on Rate Decisions Amid Powell Feud

President Donald Trump has reignited his long-standing feud with Federal Reserve Chairman Jerome Powell, publicly calling for the Fed's Board of Governors to "take over decision making" if Powell doesn't lower interest rates. In a social media post on Friday, Trump labeled Powell as "stubborn and dumb" and demanded an immediate and substantial interest rate cut. He threatened that if Powell continues to refuse, the Board should "take over and do what everyone knows must be done!" The White House did not immediately comment on Trump's remarks. This latest attack comes after Fed officials kept interest rates unchanged at their meeting on Thursday but lowered their outlook for the U.S. economy, suggesting policymakers may be gradually approaching a rate cut. Most Fed officials indicated they expect to cut rates before the end of the year.

The Mechanics of Fed Decision-Making

The interest rate decisions are made by the Federal Open Market Committee (FOMC), which is chaired by Powell. The committee includes the seven members of the Fed's Board of Governors, plus five presidents from regional Federal Reserve banks. The FOMC elects a chairman and vice chairman annually.

Trump's Persistent Criticism of Powell

After a brief period of apparent reconciliation, Trump resumed his intense criticism of Powell following Thursday's decision, blasting the Fed chair's interest rate policies and accusing him of failing to properly manage renovations at the Fed's headquarters. Trump had previously polled lawmakers on whether he should fire Powell, then later told reporters he had no intention of doing so, suggesting he was willing to wait until Powell's term as chairman ends next May.

Speculation on Powell's Successor

Former U.S. Treasury Secretary Scott Bessent said Thursday he expects Trump to be able to announce a successor to Powell before the end of the year. "We are putting together a list of very, very good candidates. I would expect that we are going to announce that before the end of the year," he told CNBC. Bessent also pointed to the dissents in Thursday's decision, as well as two upcoming vacancies on the Fed's Board of Governors in early 2025, suggesting the Board could soon have a "majority" of members who support rate cuts. Two Fed governors, Waller and Bowman, dissented from the decision, marking the first time since 1993 that two board members have dissented.

Powell's Cautious Stance

Powell has consistently taken the view that the Fed is currently well-positioned, given the uncertainty surrounding the impact of Trump's trade policies on the economy. His remarks on Thursday were notably cautious, tempering expectations for a rate cut in September while not entirely ruling out the possibility. Economic analysts suggest that the Fed is closely monitoring key economic indicators like inflation, employment figures, and consumer spending to assess the necessity of adjustments to the monetary policy. Changes in these factors could significantly influence the Fed's future decisions. Furthermore, global economic trends and geopolitical risks also play a crucial role in the Fed's considerations.