Powell Faces Scrutiny Over Interest Rates
On Monday, former economist Arthur Laffer pointed out that Jerome Powell’s reluctance to cut interest rates could make him appear like a “political hack” in President Donald Trump’s eyes.
Despite Trump’s ongoing pressure, the Federal Reserve decided in June during its fourth meeting of the year to maintain the interest rate target range between 4.25% and 4.5%. During a discussion, Fox’s Larry Kudlow asked Laffer for his thoughts on Powell’s current situation, particularly regarding Powell’s recent request for a review of the Fed’s headquarters renovation.
“I can’t claim to know the full context from the Senate or anything, Larry,” Laffer said. “But I did see Kevin Hassett, Trump’s top economic adviser, and he had a thorough explanation about why the rate should be lowered by 1.5% from where it currently sits, based on the Fed’s policies and the current economic climate.”
“Powell needs to navigate through this situation; the renovations and all the surrounding optics aren’t looking good,” he added.
In April, Trump implemented tariffs affecting several countries, which prompted Powell to express concerns about potential economic repercussions days later. Trump mentioned on April 22 that he wouldn’t replace Powell, despite rumors suggesting he might try to do so for not reducing rates.
On July 1, Powell claimed during a panel discussion that had Trump not imposed tariffs on his so-called “liberation day,” the U.S. Central Bank would have already made interest rate cuts. In response, Trump posted on social media, asserting that now is “the perfect time” for Powell to lower rates and to “stop the politics.”
As tensions rose between Trump and Powell, reports indicated that Hassett and former Federal Governor Kevin Warsh were emerging as possible replacements for Powell. A Bloomberg article on July 2 highlighted Trump’s call for an investigation into Powell by the head of the Federal Housing Finance Agency.
Trump expressed his feelings on social media, writing, “‘Too late’ should be resigning soon!!!”
Subsequently, Powell initiated a review of the Fed’s $2.5 billion headquarters renovation project, following claims that the organization was spending excessively on its luxury campus.
