Former President Donald Trump expressed concern about high interest rates and suggested that if he were to serve another term, he might pressure Federal Reserve Chair Jerome Powell to implement looser monetary policies. Trump made these remarks during an interview on NBC’s “Meet the Press,” where he also hinted at the possibility of removing Powell from his position. He argued that high interest rates prevent people from buying homes and borrowing money, and stated that he would consider influencing Powell to lower rates depending on inflation levels.
This situation reminds us of the contentious relationship between Trump and Powell during Trump’s presidency from 2017 to 2021. Trump frequently used Twitter to criticize Fed officials, calling them “boneheads” and comparing Powell to an inept golfer. These criticisms were made while the Fed was raising interest rates between 2018 and 2019. Trump claimed that he exerted pressure on Powell, leading to a decrease in interest rates. In fact, the Fed started reducing rates in 2019, eventually bringing its benchmark borrowing rate close to zero when the Covid-19 pandemic hit in March 2020. It is worth noting that Trump appointed Powell in 2018 to succeed Janet Yellen, who became Treasury secretary under President Joe Biden.
When asked if he would consider replacing Powell if re-elected in 2024, Trump was noncommittal, saying that Powell would have two years remaining in his term. Trump mentioned his strategy of “jawboning” against Powell, which he believes influenced the Fed to lower interest rates. According to Trump, this resulted in a thriving housing market and increased home purchases. However, he expressed concern about the current state of affairs, highlighting rising consumer prices and the increased cost of food.
During the Biden administration, inflation has become a significant issue, contrasting with the relatively stable inflation rates observed during Trump and Barack Obama’s presidencies. Under Biden, the consumer price index has risen over 16% in just over two and a half years, compared to less than half that during Trump’s entire presidency. Economists generally agree that the foundation for higher prices was established during the early stages of the Covid-19 crisis. Supply chains froze, consumer demand shifted from services to goods, and trillions of dollars were injected into the economy through stimulus measures implemented by Congress and the Fed to counter the pandemic’s economic impact.
Trump pledged to tackle inflation by promoting energy independence and reducing debt through increased oil drilling. He emphasized the need to lower inflation and mentioned the upcoming meeting of the Federal Reserve, where interest rates are expected to remain unchanged. Powell’s term as Federal Reserve Chair expires in February 2026.