Trump Puts Powell in No-Win Scenario

BY NICK TIMIRAOS

The Wall Street Journal
Jun 24, 2025
President’s repeated calls to lower rates complicate decision for Fed chief, board

President Trump has escalated his long-running public attack on the Federal Reserve, creating a lose-lose situation for the central bank as it navigates the risks of higher prices and weaker growth from tariffs.


The assault has little modern precedent and forces the Fed to confront a dreadful choice: It could cut rates sharply as Trump wants and risk fueling inflation that damages its credibility with markets. Or it could maintain its current wait-and-see stance, and face further bullying that would weaken its standing if the economy slows sharply and the administration is validated in its view that inflation shouldn’t be a worry.


The presidential pressure is being applied at the same time that a divide is opening up among Fed policymakers that could further complicate Chair Jerome Powell’s effort to balance political and economic hazards in the months ahead.


Among Fed officials who have spoken since last week’s meeting, the first to signal any appetite to cut rates at the Fed’s next meeting in late July have been the two appointed by Trump in his first term.


Michelle Bowman, the Fed’s vice chair for bank supervision, said in a speech Monday she was more worried about risks of weaker employment than higher inflation—a meaningful shift for a policymaker who was previously highly focused on inflation worries.


Fed governor Christopher Waller said in a CNBC interview Friday that he could support a rate cut next month because he worries about allowing too much labor market weakness.


Powell faces Congress Tuesday for regularly scheduled testimony on monetary policy. How lawmakers regard Powell’s performance will be a key gauge of support for Fed independence. The central bank has in recent decades operated with a measure of independence in order to set monetary policy free of direct political control, which Powell has worked assiduously to defend.


High stakes


The stakes extend far beyond current policy debates. Powell’s term expires in less than a year. Trump could establish a template for presidential influence that reshapes the central bank, with his relentless criticism serving as both a warning to Powell’s successor and a casting call for replacements who signal they will appease him.


If future central-bank leaders feel more compelled to consider political preferences alongside economic data, decades of credibility that anchor global confidence in U.S. monetary policy could be degraded.


On Friday, Trump called on Powell to reduce the central bank’s policy rate, currently around 4.3%, to between 1% and 2% to lower rising costs to service the federal debt.


Other Trump advisers, including Commerce Secretary Howard Lutnick, have amplified the president’s criticisms of monetary policy by arguing that worries about tariff-driven inflation are being exaggerated.


Since meeting with Powell privately in the Oval Office last month, Trump has unleashed a torrent of insults. “I don’t know why the Board doesn’t override this Total and Complete Moron!” said Trump in a socialmedia post on Friday.


Powell has said the Fed makes its decisions based on its best analysis of the economy. “From my standpoint, it’s not complicated. What everyone [at the Fed] wants is a good, solid, American economy,” he said last week.


In speeches in the past two months, former Fed governor Kevin Warsh has said the central bank is to blame for attacks on its conduct. “I read breathlessly in the newspapers how mean these politicians are to the central bank. Well, grow up! Be tough,” said Warsh, a leading candidate for Fed chair, at a panel discussion last month.


Nixon mischief


Presidential pressure over Fed chairs isn’t new, but it used to happen in private. In the 1960s, President Lyndon Johnson physically intimidated his Fed chair, William McChesney Martin Jr., after summoning him to his Texas ranch; seated together on the porch, they later played down any conflict to reporters.


In the 1970s, President Richard Nixon and his advisers planted a false story in the press that chair Arthur Burns was seeking a pay raise while arguing for price and wage controls. Burns ultimately yielded to White House pressure.


The high inflation that followed in the 1970s was cured by punishing recessions in the early 1980s. Ever since, central bankers in the U.S. and other advanced economies have tried—and largely succeeded— in building support among the government for greater independence, arguing that it leads to better economic outcomes.


“It is normal for presidents to put pressure on the Fed chair, but Trump’s feel different. His attacks are more vicious, constant, and public,” said Mark Spindel, an investment manager who co-wrote a history of Fed independence.


Powell became Fed chair in 2018 after Trump appointed him, and the president frequently bashed Powell for being too slow to support the economy by lowering interest rates.


Trump’s critiques over the past week have been different. Republicans in Congress and Trump’s White House have found it more difficult than expected to cut spending and reduce deficits. That has led the president to press for lower interest rates to bring down growing payments on the federal debt, which this year could exceed what the U.S. spends on the military.


The attacks put the Fed in a communications bind. If the Fed isn’t seen as acting in the country’s best interest, it will be harder for the institution to make the at-times difficult but necessary decisions to slow the economy to control inflation.

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