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Donald Trump has said that he will only choose a new chairman of the Federal Reserve that will lower the American interest rates because he called on the central bank to reduce loan costs to 1 percent.
The president also renewed his attack on the current chairman Jay Powell and described him as a “stubborn mule” and said that he would “love him to resign if he wanted”. Powell said that he will serve the duration of his term, which ends in May 2026.
“The one who is there will lower the rates,” Trump told reporters in the Oval Office on Friday, referring to his choice to replace Powell. “If I think someone will keep the rates where they are, I will not deploy them.”
Trump’s comments mark the last barrage in an unprecedented attack by an American president at the head of the central bank of the country. He repeatedly has the decision of the Fed to keep the rates on hold at 4.25-4.5 percent this year, so that a cutting cycle was stopped that started in 2024.
‘I think we have to pay [rates of] 1 percent at the moment, “said Trump. He added that he had told his board ‘not to blame than nine months or so’ until a new FED chair took office. Despite his comments, the treasury will sell bonds for the next fourteen days.
Trump said earlier this week that he already has a shortlist of “three or four names” to run the Fed, although the White House told the Financial Times that no decision was “threatening”.
His pressure on Powell speculated that he could choose a “shadow -fed chair” that he agrees with him quickly lowering the rates.
Christopher Waller, a Fed Gouverneur who is seen as a candidate to replace Powell, has already supported a rate reduction in July. Kevin Hassett, another candidate who now leads the National Economic Council of the White House, has also supported the reduction of loan costs.
Scott Bessent, the American Minister of Finance, who is also in the running, has said that the proceeds on two-year Treasury notes indicate that the FED should lower the rates.
Another candidate, former Fed Governor Kevin Warssh, has indicated that he believes that the focus of the central bank should be on fighting inflation, suggesting that he is more raced than the other candidates.
Many believe that the shadow strategy can be counterproductive.
“Although it sounds like a smart idea, it doesn’t stand,” says Robert Barbera, an economist at Johns Hopkins University. “The reason is because the Fed is not a kingship.”
The FED chairman determines the interest rates in addition to 18 other members of the Federal Open Market Committee. Eleven next to the chair also has a voice.
“If the next chair tried to bend the muscles that he does not really have, this would mainly damage the relationships with the rest of the committee,” said Jon Faust, a former special adviser to Powell who is now also with Johns Hopkins. “That would reduce the influence that the new chair would have arrived.”
Raghuram Rajan, an academician from the University of Chicago who came under political pressure as head of the Reserve Bank of India, said that the unique structure of the FED-with a centralized administration that was supported by 12 private regional bank-insulated rate-enterties not affected by the presidential of the president.
There was “very little” that the president could do to influence the regional presidents or other Fed governors, Rajan said.
Additional reporting by Kate Duguid in New York
