U.S. Federal Reserve (the Fed) has frozen the benchmark interest rate for four consecutive times, bringing President Donald Trump's dissatisfaction back to the surface. President Trump strongly opposed the Fed's decision, publicly criticizing Chairman Jerome Powell and saying, "I could do better if I were in charge of the Fed," calling into question the Fed's independence.
Led by Chairman Powell, the Fed maintained the benchmark interest rate at the current 4.25-4.50% during the June Federal Open Market Committee (FOMC) meeting. This was due to continuing uncertainties in the economic situation. The Fed lowered its growth rate forecast for the year while slightly increasing its inflation and unemployment rate projections. However, there was no mention of the timing for anticipated interest rate cuts.
President Trump expressed blatant displeasure with the Fed's stance. He referred to "someone stupid at the Fed," questioning Chairman Powell's intelligence and said, "I'm better than those people." In an interview with reporters, he claimed that it would be "good" to lower interest rates by 2.5 percentage points.
Bloomberg noted that one reason President Trump strongly demands interest rate cuts is due to the burden of government liabilities. He believes that lowering interest rates would help reduce the government's interest expenses. According to the U.S. Treasury, since the beginning of this fiscal year, the federal government's interest expenses have reached $776 billion, a 7% increase compared to the same period last year.
The problem is that if the Fed lowers interest rates under political pressure, the market might interpret it as a "weakening of fiscal responsibility." Economists warn that if the Fed's policy credibility is damaged, inflation expectations may rise again, leading to side effects such as increased long-term interest rates.
Trump's resentment towards Chairman Powell isn't limited to interest rate issues. He has previously criticized Powell's stubborn monetary policy stance and hinted at personnel changes. While the independence of the Fed is one of the core principles of the U.S. economy, there are assessments that Trump has used it as a tool of "realpolitik."
Some political circles believe that Trump is likely to actively use interest rate issues as a "livelihood" agenda in future election phases. Analysts suggest that he aims to highlight his conflict with Chairman Powell by creating a narrative that "high interest rates have devastated the economy of ordinary people."