Donald Trump has long struggled with the basics of economic policy, but there’s one detail the president seems to understand fairly well: When the Federal Reserve lowers interest rates, it helps accelerate the economy, and when the Fed raises rates, it pumps the economic brakes.
With this in mind, the Republican has spent the last decade making knee-jerk pronouncements about the Fed that have stuck to a predictable pattern: Trump has publicly lobbied for higher interest rates when he thought it would benefit his political interest, just as he’s publicly lobbied for lower interest rates when he thought they would also advance his ambitions.
It’s never been about what would help Americans; Trump’s priority related to the Fed has long been about helping himself.
With this in mind, since the president’s second term began, he’s repeatedly and publicly pressed Federal Reserve Chairman Jerome Powell — a Trump first-term nominee — to lower interest rates. Powell, mindful of stubborn inflation rates and the obvious fact that a rate cut would likely make inflation worse, has ignored the wildly inappropriate pressure campaign.
As The New York Times reported, this has apparently inspired the president to kick things up a notch.
President Trump on Thursday escalated his long-running attack on the Federal Reserve, by lashing out repeatedly at the head of the nation’s central bank, Jerome H. Powell, for not doing enough to fortify the economy as the effects of tariffs take hold. ... In an early morning social media post that ricocheted around Washington, Wall Street and beyond, Mr. Trump reprised those attacks, saying: ‘Powell’s termination cannot come fast enough!’
Hours after publishing that provocative missive, the president seemed to endorse a weird conspiracy theory about his own handpicked Fed chair — he suggested Powell was refusing to lower rates for “political” reasons, which didn’t make sense — before bragging about his power to fire the “terrible” chairman.
“If I want him out, he’ll be out of there real fast, believe me,” Trump told reporters.
There’s no shortage of problems with this ridiculous campaign, starting with the fact that in modern American history, no other president has even come close to using heavy-handed tactics like these against the Federal Reserve. What’s more, that the president appears so desperate for a rate cut looks like an implicit admission that his tariffs agenda is failing to create the economic “boom” he was hoping for.
Just as importantly, if not more so, is the inconvenient fact that Trump can’t legally fire Powell without cause, even as the president suggests otherwise. If he were to try to take such a step, it would face immediate pushback in the courts, while simultaneously adding a fresh round of chaos and uncertainty to the markets.
But in case this weren’t quite enough, let’s also not lose sight of the fact that Trump seems increasingly desperate to break down the wall dividing the Oval Office from Powell’s office. The Economic Security Project’s Chris Hughes wrote an op-ed for The New York Times about the significance of the Federal Reserve’s independence.
“If Mr. Trump succeeds in subjugating the Federal Reserve, the consequences would extend far beyond his term in office,” Hughes wrote. “Interest rates would fluctuate with election cycles rather than economic conditions. Inflation expectations would become unanchored, creating the potential for prices to spiral out of control. The dollar’s status as the world’s reserve currency — which gives America enormous economic advantages — would be jeopardized.
“And beyond the Fed, Mr. Trump’s assault on institutional independence would threaten a tradition that has been essential to America’s success. ... By undermining these principles, Mr. Trump isn’t making America great. He’s dismantling the institutional architecture that made American prosperity possible in the first place.”