Trump gives birth to chairs as interest rates remain stable amid tariff fears
President Donald Trump criticized Federal Reserve Chairman Jerome Powell after the Fed stabilized the rate, citing risks from Trump’s tariff expansion.
Federal Reserve Chair Jerome Powell may have had enough of a White House pressure campaign to ultimately have him either cuts or resignation.
For months, Powell has resisted responding to a constant public ber from President Donald Trump, but the final straw may have claimed last week that a White House adviser either claimed Powell had lied to Congress about the Fed headquarters renovation, or that he grossly mismanaged it. If either of them proves true, Trump can give Fire Powell the cover “for the cause.”
Powell and the Fed are finally fighting back. Over the weekend, the Fed quietly posted a FAQ, explaining what happened with the Fed’s headquarters renovations, and Powell reportedly asked central bank inspectors to consider a $2.5 billion headquarters renovation project.
Powell’s firing could raise doubts about the Fed’s independence and destroy the credibility of central banks that manage monetary policies independent of policymakers.
“The stocks could have been affected by risk-off flights to safe trade,” said Padraickgarvey, head of area studies for the Americas at the Bank of Netherlands. “After all, this is an effective forced exit of the reputable Fed chair by the US president and an unprecedented event for the market to wrap its heads.
“But then, stocks can opt to immediately reassess and meet up on the theory that deep cuts are a boon for businesses, just as potentially a sultry economy,” he said.
What happened to the renovation?
The original cost of renovations to the Fed’s three office buildings overlooking the National Mall in Washington, DC, was estimated at $1.9 billion in 2019, but rose to $2.5 billion. The increase in budget by more than 33% was due to design changes, material costs, equipment and other “expected conditions.” This is more like asbestos than the expected toxic contamination in the soil.
Last week, Trump’s Budget Director Russell Vought wrote a letter suggesting that Powell had made false statements to Congress about expensive renovations or failed to comply with permit rules for the construction of capital areas. Trump has also appointed three White House advisors to the National Capital Planning Commission. This must be registered in a major construction project in the area.
Vought called the luxurious VIP dining area and rooftop terrace garden, among other things.
However, the Fed’s FAQ states that “no new VIP dining rooms have been built,” and the “garden terrace” is said to be “a ground level front lawn on 1951 Constitution Avenue and serves as the roof of the parking lot below it.” “The green roofs are located in other federal buildings, including the Judiciary, the Department of Interior and many other departments, and are encouraged by the General Services Department.”
Will Powell survive the new attack?
For some, Powell is already causing damage, whether he stays in a already-bred chair or not.
“It’s easy to argue that the market has lost confidence in the Fed,” said Nancy Tengler, CEO of Laffer Tengler Investments.
She pointed out some of what Powell considers as the Fed chair. This includes a fee hike in 2018, which said it caused an annual bear market in response to Trump 1.0 tariffs. He was forced to surrender in a few months.”
Then in 2021, the Fed said, “It was transformed from controlled burns into wildfires, which was too long for a rate hike, and consumer prices rose to 9.1% by June 2022.
Other economists say that if Powell goes, the impact may be limited.
“Essentially, this is likely to lead to a considerable early sale that could settle down by forceful repeating the Fed’s independence,” said Jim Reid, director of global economics and theme studies at Deutsche Bank.
“The early departure of Powell will soon be followed by a replacement superdove as head of the Federal Reserve.” A pigeon is someone who leaps towards keeping interest rates lower to grow the economy compared to Hawk, who favors higher interest rates to maintain control of inflation.
However, even if there is a “super dove” on top of the Fed, Garvey is questioning how many policies will change.
“We can allow (the Fed’s policy-making unit) to swing in the middle of more than ever before. But we can’t conclude that the committee will cut the fees just because Trump will lead it. Ultimately, it’s a majority decision, and the committee could be as divided as the latest minutes, but there’s a bias to hold interest rates until it’s clear that the coast will cut them.”
Medora Lee is a money, market and personal finance reporter for USA Today. mjlee@usatoday.com and Subscribe to our free daily money newsletter Personal finance tips and business news every Monday to Friday.
