After the U.S. Federal Reserve maintained its benchmark interest rate in the range of 4.25% to 4.5% on June 18, President Donald Trump immediately posted on social media, criticizing Chairman Jerome Powell as "Mr. Too Late" and a "dummy", arguing that the current monetary policy is causing the country to "lose billions of dollars". This rare public confrontation between the president and the central bank once again puts the Fed's independence under a magnifying glass.
Trump's Full Firepower
After the decision was announced, Trump posted multiple messages, reposting articles from Fannie Mae and Freddie Mac's regulatory bodies, advocating "resign if not lowering interest rates". His attack was personalized, focusing on Powell's refusal to immediately lower interest rates.
"Mr. Too Late Powell is the worst, he is a dummy, causing the United States to lose billions of dollars!"
The Fed should cut rates by 10 basis points... Europe has cut rates ten times, and you probably won't cut rates today.
High Interest Rate Pressure Spreads
Mortgage rates are approaching 7%, almost double what they were a few years ago. The Federal Housing Finance Agency (FHFA) director publicly demanded Powell lower interest rates and challenged through National Mortgage News to "cut or quit". Trump linked high interest rates to federal borrowing costs, claiming the government loses "hundreds of billions of dollars" annually. Despite increasing external pressure, the Fed only forecast a maximum of two 0.25 percentage point rate cuts this year.
Fed Remains Unchanged
Powell said in the post-meeting press conference that while the U.S. economic foundation remains relatively stable, trade tariffs and geopolitical uncertainties are rising, with their complete impact "taking months to become clear". Therefore, the board decided to remain cautious, downgrading the 2025 growth forecast while adjusting inflation and unemployment rate estimates upward. This is in sharp contrast to Trump's demand for rapid rate cuts.
Independence Test
TipRanks analysis suggests that Trump's remarks may increase market volatility, especially for interest rate-sensitive stocks. Although the president has threatened to fire Powell, Powell has repeatedly emphasized he will complete his term and reiterated his goal of "price stability and maximizing employment". Amid political pressure and economic data, the Fed's independent decision-making mechanism faces a severe test.
The confrontation between Trump and Powell highlights the tense relationship between politics and monetary policy. In the short term, the Fed seems unlikely to immediately adjust interest rates due to external voices, but this dispute has cast more variables over future policy directions.
