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Donald Trump has long struggled with the basics of economic policy, though there’s one detail the former 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.
It was against this backdrop that the Republican shared some thoughts this morning about the Fed and the chairman he chose for the position. Axios reported:
Former President Trump told Fox Business on Friday that if re-elected in November, he would not reappoint Jerome Powell to a third term as chair of the U.S. Federal Reserve. ... Trump, the Republican presidential frontrunner, has a checkered relationship with Powell, routinely criticizing the central bank on its rate decisions while in the White House.
Powell’s current term expires in 2026, and he hasn’t yet said whether he’d like to serve a third term. But if he hopes to remain at his post, the winner of this year’s presidential election will be in a position to decide the incumbent Fed chair’s fate.
Trump, evidently, not only wants it to be known that he’d replace Powell with someone new, he also effectively accused his own handpicked Fed chair of corruption, telling Fox Business he suspects Powell is “going to do something to probably help the Democrats,” such as lower interest rates.
Calling Powell “political,” the presumptive GOP nominee added, “It looks to me like he’s trying to lower interest rates for the sake of maybe getting people elected.”
In terms of the evidence to substantiate such serious allegations, Trump has presented literally nothing, because no such evidence exists.
So why say all of this? I think there are a couple of angles to keep in mind.
First, Trump is almost certainly lobbying Powell not to lower rates by applying pressure the only way he can: through threats, name-calling, and baseless allegations.
It's not subtle: The former president wants Powell to think twice before doing the right thing for the public — because it'd be the wrong thing for the Republican's campaign, which is obviously the greater priority.
Second, if all of this seems eerily familiar, it’s not your imagination. During his 2016 candidacy, Trump falsely accused then-Fed Chair Janet Yellen of being corrupt in the hope that she’d raise rates, weaken the economy, and improve his chances of electoral success. After replacing Yellen with Powell, the Republican publicly went after the Fed again for making monetary decisions at odds with his political agenda.
In case this isn’t obvious, let’s make it plain: Trump’s opinion of Fed chairs is based entirely on one thing: whether or not the Fed chairs are advancing Trump’s political interests.
If so, they’re great. If not, they’re corrupt and worthy of public condemnation. The merits of monetary policy have long been irrelevant to him. What matters is what the Fed’s decisions mean for him personally. Period. Full stop.
How will Powell respond to such brazen nonsense? The New York Times’ Paul Krugman wrote in a recent column, “In a recent dialogue with me about the economy, my colleague Peter Coy suggested that the Fed may be inhibited from cutting rates because it’ll fear accusations from Trump that it’s trying to help Biden. I hope Fed officials understand that they’ll be betraying their responsibilities if they let themselves be intimidated in this way.
“And I hope that forewarned is forearmed. MAGA attacks on the Fed are coming; they should be treated as the bad-faith bullying they are.”