President Donald Trump and Federal Reserve chair Jerome Powell are in a battle of wills right now.
Powell is refusing to lower interest rates, and Trump is blaming him for the bad economic numbers and demanding his resignation.
The chairman's term will be up next year, so now, there is growing speculation about whom Trump will appoint, but the early favorite in the race was just taken out of the running.
Powell has been very hesitant to lower rates amid Trump’s trade war.
The chairman has stated that he wants to see how the tariffs will impact the economy before making that call, and he does not believe he has a big enough sample at this point.
Trump has been insisting that Powell is doing this on purpose to hurt the administration, now demanding that the chairman resign (Trump knows if he fires Powell, it would be litigated, and likely not settled before the end of his term).
The president recently posted, “‘Too Late’ Powell should resign, just like Adriana Kugler, a Biden Appointee, resigned. She knew he was doing the wrong thing on Interest Rates. He should resign, also.”
Bessent, the current secretary of the Treasury, was recently asked how he would manage serving as Fed chair during the Trump presidency if asked to do so.
He responded, “I will do what the president wants.”
For the record, the Fed is not supposed to be at the beck and call of the president, and there is a very good reason why it is an independent agency that does not answer to the White House.
Bessent’s answer created alarm on both sides of the aisle, yet at the same time, most agreed that the interest rates need to be lowered. Much to the chagrin of Trump, Powell again refused to lower rates at the most recent opportunity.
Much to my surprise, Trump announced this week that Bessent is no longer being considered as a candidate to replace Powell.
Trump stated, “I love Scott, but he wants to stay where he is. I asked him just last night, ‘Is this something you want?’ [Bessent said], ’Nope, I want to stay where I am.’ He actually said, ‘I want to work with you.’ It’s such an honor. I said, ‘That’s very nice. I appreciate that.’”
He then praised Bessent for the job he is doing thus far, stating, “He’s doing a really good job. We made the greatest trade deals in the history of our country. We had to because we were being ripped off by the world.”
Trump did state that he has the list of candidates down to four people, although he did not go into much more detail than that. Right now, Trump is counting down the days until Powell’s term is over, and my guess is that as soon as the new chair takes his or her seat, rates will immediately be lowered to the president's liking.
