Powell Balances Fed Independence Amid Trump Rate Pressure/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Federal Reserve Chair Jerome Powell signaled possible rate cuts in September, sparking fresh questions about Fed independence. President Trump has pressured for steep cuts, but Powell insists his concerns center on slowing growth, not politics. Economists warn that inflation and unemployment risks could complicate the Fed’s decisions.
Powell, Trump, and Fed Independence: Quick Looks
- Powell’s Signal: Possible interest rate cut at September meeting
- Trump’s Demand: Wants rates slashed to 1%, far below Fed outlook
- Fed’s Rationale: Slow growth, weakening labor demand, tariffs raising inflation
- Current Rate: 4.3% on short-term benchmark rate
- Inflation Concern: Fed officials warn prices remain “too high”
- Fed Structure: 19 policymakers, 12 voting on rate decisions
- Political Pressure: Trump threatens Fed Governor Lisa Cook’s position
- Independence Debate: Economists stress avoiding “loyalty tests” for central bank
- Global Spotlight: Powell received standing ovation at Wyoming symposium
- Next Step: September Fed meeting could deliver first cut in years
Deep Look: Powell Faces Political Pressure as Fed Considers Rate Cuts
WASHINGTON — Federal Reserve Chair Jerome Powell faces one of the toughest balancing acts of his career: how to move toward an interest rate cut without appearing to bow to President Donald Trump’s mounting pressure campaign.
On Friday, Powell told economists and central bankers gathered at the Fed’s annual symposium in Jackson Hole, Wyoming, that the economy has slowed enough to justify potential easing at the September meeting. Yet the decision carries enormous weight. Cutting too soon risks looking like a political concession; waiting too long could deepen economic weakness.
Growth Slowing, Risks Rising
Powell highlighted evidence that the economy has cooled considerably. Growth slowed to just 1.2% in the first half of 2025, down from 2.5% a year earlier. Job demand has weakened sharply, raising fears of higher unemployment later this year.
“We’ve seen a marked slowing in the demand for workers,” Powell noted. “That trend is concerning.”
Still, inflation remains elevated. Tariffs on imported goods have lifted consumer prices and could continue to do so. That complicates the Fed’s calculus: cut rates to support growth, or hold firm to prevent inflation from spiking again.
Trump’s Push for Steep Cuts
President Trump has repeatedly called on Powell to slash rates, claiming inflation is non-existent and arguing that lower borrowing costs would save the government billions on its $37 trillion debt load.
Trump has demanded cuts as deep as 1% — a level no current Fed policymaker supports. The Fed’s benchmark rate currently sits at 4.3%, directly affecting mortgages, auto loans, and business borrowing.
Powell, however, stressed that any cuts would be gradual and based on economic data, not politics. “The Fed will move carefully,” he said, signaling only modest reductions ahead.
Defending Fed Independence
A politically independent central bank has long been seen as crucial for economic stability. By insulating monetary policy from electoral politics, the Fed can raise rates to fight inflation even when unpopular.
Beth Hammack, president of the Cleveland Fed, underscored that principle in an interview Friday: “I’m laser focused on outcomes for the public. I tune out all the other noise.”
She and several colleagues remain worried that inflation is “too high” and trending away from the Fed’s 2% target.
Economist Adam Posen of the Peterson Institute noted that Powell deliberately avoided mentioning independence in his speech — a move he interpreted as a signal.
“Not talking about independence was itself a way of showing independence,” Posen said.
Trump Targets Fed Officials
Powell isn’t the only Fed leader under fire. This week Trump escalated pressure on Governor Lisa Cook, threatening to fire her if she does not resign.
Trump allies accused Cook of mortgage fraud involving property purchases in 2021, though she has not been charged. Cook has said she will not be “bullied” into leaving.
Her removal would give Trump the chance to appoint another loyalist to the Fed board. He already nominated White House economist Stephen Miran to replace outgoing governor Adriana Kugler.
Trump previously threatened to fire Powell himself but never followed through. Powell’s term ends in nine months, raising speculation about his replacement.
History of Clashes
Powell is no stranger to presidential pressure. In 2018, Trump berated him for raising interest rates to cool inflation. Powell held his ground then, and observers expect him to do so again.
“The president has a long history of applying pressure,” said Michael Strain of the American Enterprise Institute. “And Chairman Powell has a long history of resisting it. It would be odd if he caved for the first time now.”
Still, Strain warned that Powell may be overestimating the economy’s weakness. If inflation persists while job growth stabilizes, the Fed could be forced to reverse course and hike rates again in 2026, potentially damaging its credibility.
Global Spotlight on Powell’s Next Move
Powell received a standing ovation at the Jackson Hole symposium, where global economists and central bankers gathered. The applause reflected respect for his cautious approach, even as political pressures mount at home.
The Fed’s next meeting in September now looms as a critical test: can Powell navigate between economic necessity and political optics while keeping the Fed’s independence intact?
For now, Powell has signaled that while cuts are likely, they will be gradual, measured, and decidedly not dictated by the White House.
You must Register or Login to post a comment.